Scientific Beta

Among the highlights of the September 2019 quarterly performance report for the Scientific Beta multi smart factor indices, this quarter, ending September 30, 2019, 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 0.69%, 1.19%, 0.60%, 1.22% and 0.62% respectively compared to cap-weighted indices.

Scientific Beta offers smart factor indices that provide exposure to the six known rewarded factors (Mid Cap, Value, High Momentum, Low Volatility, High Profitability and Low Investment) which are also well-diversified to reduce specific risks. These indices are available in a variety of versions, notably enabling broad and narrow indices to be distinguished that correspond to a pronounced choice 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 to ensure a very high factor intensity. 

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. Multi-Beta Multi-Strategy Indices are Scientific Beta’s flagship indices. These indices correspond to a multi-factor index allocation that uses Scientific Beta Diversified Multi-Strategy Factor Indices, with intensity to a particular factor, as building blocks. This approach minimises unintended specific risks and provides blended intensity to the desired risk factors. This double diversification – allocation across various factors (Multi-Beta allocation) along with a smart diversification of the specific risks (Diversified Multi-Strategy weighting scheme) – minimises the non-rewarded risks, hence the name Multi-Smart Factor Indices. 

Scientific Beta proposes a wide range of Multi-Beta Multi-Strategy indices based on its investment philosophy. This report focuses on 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 that 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 September 2019 quarterly performance report for the Scientific Beta indices:

(1) The live analysis is based on daily total returns in the period from December 20, 2013 (live date) to September 30, 2019 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.