Scientific Beta
Among the highlights of the December 2018 quarterly performance report for the Scientific Beta indices, this quarter, ending December 31, 2018, the best performing index in the Developed universe among the single smart factor indices is the SciBeta Developed Narrow High Factor Intensity Low Volatility Diversified Multi-Strategy (4-Strategy) index with a relative return of 4.84% compared to the broad cap-weighted index. Among the multi-factor indices, the best performance this quarter is obtained by the SciBeta Developed High Factor Intensity Diversified Multi-Beta Multi-Strategy 6-Factor 4-Strategy EW index with a relative return of 0.70%.
Scientific Beta offers smart factor indices that provide exposure to the six well-known rewarded factors (Mid Cap, Value, High Momentum, Low Volatility, High Profitability and Low Investment) that are also well-diversified in order to reduce the specific risks. These indices are available in a wide range of versions, notably enabling broad and narrow indices to be distinguished that correspond to more or less pronounced choices of factor exposure. Furthermore, these single smart factor indices can be used in multi-factor allocations by taking into account the interactions between the indices in order to guarantee very high factor intensity. In this report, we have chosen to present the smart factors represented by the Scientific Beta Narrow High Factor Exposure Diversified Multi-Strategy (4-Strategy) indices.
Naturally, many investors choose to diversify their factor exposure so as not to be exposed to variations in the performance of a single factor. For this reason, Scientific Beta Multi-Beta Multi-Strategy (MBMS) indices provide an allocation to well-rewarded smart factor indices. Here again, Scientific Beta proposes a wide range of Multi-Beta Multi-Strategy indices based on its investment philosophy. This report presents those that enable the diversification of factor and specific risks to be reconciled. Among these indices, we have chosen to present some of the more popular ones, namely the strategy with the longest live track record – the SciBeta Multi-Beta Multi-Strategy 4-Factor Equal-Weight index, together with other strategies created more recently which take into account the interactions between single-factor indices in order to provide the highest factor intensity at a multi-factor level – represented by the SciBeta High Factor Intensity Diversified Multi-Beta Multi-Strategy 6-Factor 4-Strategy Equal-Weight index, together with its Sector Neutral version, Market Beta Adjusted (Overlay) version that corrects for market beta bias, and combined Sector Neutral/Market Beta Adjusted (Overlay) version.
Among the highlights of the December 2018 quarterly performance report for the Scientific Beta indices:
- Scientific Beta offers single smart factor indices providing exposure to the six well-known rewarded factors (Mid Cap, Value, High Momentum, Low Volatility, High Profitability and Low Investment) that are also well-diversified in order to reduce the specific risks. This quarter, ending December 31, 2018, the best performing SciBeta Narrow High Factor Intensity Diversified Multi-Strategy (4-Strategy) index in the Developed universe was Low Volatility with a relative return of 4.84% compared to the broad cap-weighted index, while High Momentum posted the lowest relative return (-3.11%). Half of the factors outperformed their cap-weighted benchmark this quarter, with the six indices showing an average outperformance of 0.31%.
- Naturally, many investors choose to diversify their factor exposure so as not to be exposed to variations in the performance of a single factor. For this reason, Scientific Beta multi smart factor indices provide an allocation to well-rewarded smart factor indices. This quarter, the SciBeta Developed Multi-Beta Multi-Strategy 4-Factor EW index, the SciBeta Developed High Factor Intensity Diversified Multi-Beta Multi-Strategy 6-Factor 4-Strategy EW index and its Sector Neutral, Market Beta Adjusted (Overlay), and combined Sector Neutral/Market Beta Adjusted (Overlay) versions posted relative returns of 0.05%, 0.70%, -0.60%, -0.73% and -1.74% respectively compared to cap-weighted indices.
- The Scientific Beta Multi-Beta Multi-Strategy 4-Factor EW indices, which were the first multi-factor indices to be offered by Scientific Beta, show an average live annualised outperformance across all Scientific Beta Developed regions of 1.49% over their five-year live track record and an improvement in the Sharpe Ratio of 52.36% compared to their cap-weighted benchmark (1).
(1) The live analysis is based on daily total returns in the period from December 20, 2013 (live date) to December 31, 2018 for all diversified multi-strategy indices that have more than three years of track record for all available developed world regions - USA, Eurozone, UK, Developed Europe, Developed Europe ex-UK, Japan, Developed Asia Pacific ex-Japan, Developed ex-UK, Developed ex-USA and Developed. The benchmark used is a cap-weighted portfolio of all stocks in the respective Scientific Beta universes.