Scientific Beta

aiCIO: "In Goltz’ experience, custom indexing makes sense for institutions, like UPS, that seek smart beta exposure within specific parameters. “If the institution has a certain liquidity requirement, sector exclusions, or environmental, social, and governance screens, a standard product may not be relevant,” he says."

aiCIO 22/04/2013

"(...) “Costs have come down a lot over the past five years,” says Felix Goltz, head of applied research at the EDHEC-Risk Institute, a smart beta think tank and index developer. “That said, providers don’t offer much information publically, and the costs will differ among investors. Licensing costs for smart beta indexes should be no more expensive than cap-weighted. With increasing competition, costs have clearly dropped over time.” Aside from licensing an index from the likes of EDHEC or customizing one, investors can also access smart beta through exchange-traded funds (ETFs). (...) In Goltz’ experience, custom indexing makes sense for institutions, like UPS, that seek smart beta exposure within specific parameters. “If the institution has a certain liquidity requirement, sector exclusions, or environmental, social, and governance screens, a standard product may not be relevant,” he says. “For example, a corporate pension plan sponsored by a major oil company would likely prefer to avoid over-concentration in that area.” (...)"