Scientific Beta

Among the highlights of the March 2016 quarterly performance report for the ERI Scientific Beta indices, this quarter, the SciBeta Developed Multi-Beta Multi-Strategy EW (Equal Weight) index, the SciBeta Developed Multi-Beta Multi-Strategy ERC (Equal Relative Risk Contribution) index and the SciBeta Developed Multi-Beta Multi-Strategy Quality index post relative returns of 2.18%, 2.04% and 2.53% respectively, compared to cap-weighted indices.

Recent years have seen the development of numerous smart beta indices whose weighting schemes depart from those of cap-weighted indices. Smart beta indices may be obtained by tilting economic factors, such as book-to-market, size or volatility, or by introducing greater diversification into the index, as illustrated in multi-strategy indices. The positive performance of smart beta indices over the long term has been largely documented in the literature. However, these indices are exposed to risk factors that differ from those of cap-weighted indices and that may cause variations in performance over short periods. As a result, the presentation of long-term performance is not enough for investors, who are also demanding performance figures over recent and shorter periods. The present report gives a complete picture of smart beta index performance with both long-term and short-term figures that illustrate the variations in performance over the different time periods, as well as the variations in performance between the various strategies. As a result, combining the various smart beta strategies makes it possible to obtain more robust performance.

Among the highlights of the March 2016 monthly performance report for the ERI Scientific Beta indices:

• This quarter, ending March 31, 2016, the best performing index in the Developed World universe among smart factor indices is the SciBeta Developed Low Volatility Diversified Multi-Strategy index, with a relative return of 3.61% compared to the broad cap-weighted index, while the SciBeta Developed Value Diversified Multi-Strategy index posts the lowest relative return (0.83%).
  
  
• Scientific Beta Multi-Beta Multi-Strategy (MBMS) indices associate an effective choice of weighting scheme, in terms of diversification, with an allocation to well-rewarded smart factors, to prevent indices from being too concentrated in one factor and to reduce their specific risks. Over the live period ending this quarter, 25 out of the 27 Scientific Beta Multi-Beta Multi-Strategy indices post positive relative returns over their corresponding live periods compared to the broad cap-weighted indices of the respective regions for the same time-period, with average annualised outperformance of 4.38% for all of these indices.
  
  
• This quarter, the SciBeta Developed Multi-Beta Multi-Strategy EW (Equal Weight) index, the SciBeta Developed Multi-Beta Multi-Strategy ERC (Equal Relative Risk Contribution) index and the SciBeta Developed Multi-Beta Multi-Strategy Quality index post relative returns of 2.18%, 2.04% and 2.53% respectively, compared to cap-weighted indices. Year-to-date, the relative returns of the SciBeta Developed Multi-Beta Multi-Strategy indices are positive (2.18%, 2.04% and 2.53% respectively).
  
  
• Over the long term, all flagship Scientific Beta Multi-Beta Multi-Strategy indices post positive excess return compared to broad cap-weighted indices. Using long-term US track records since December 31, 1972 (43 years), the Scientific Beta Multi-Beta Multi-Strategy EW, ERC and Quality benchmarks post respective relative returns compared to the cap-weighted index of 3.67%, 3.48% and 3.31%.