Scientific Beta

Barron's: "Marc Zieger, ERI Scientific Beta’s head of North American business development, told Barron’s that the pricing structure reflects the “robustness” of the firm’s flagship “multibeta multistrategy” methodology. This approach, like others on the market, aims to capture market-beating “factors” found in academic research to beat the market over time; these well-known anomalies include value, momentum, low volatility, and small size."

Barron's 04/06/2016

"(...) Last week, ERI Scientific Beta implemented a “pay for what you get” pricing option for its institutional clients. Those that sign on will pay zero fixed management fees based on assets; instead, they would pay only when a proprietary index beats a traditional market-cap-weighted one. When it does, ERI Scientific Beta—the smart-beta offshoot of the nonprofit EDHEC-Risk Institute, an investment-focused academic organization—will levy performance fees of 20% of the excess return. (...) Marc Zieger, ERI Scientific Beta’s head of North American business development, told Barron’s that the pricing structure reflects the “robustness” of the firm’s flagship “multibeta multistrategy” methodology. This approach, like others on the market, aims to capture market-beating “factors” found in academic research to beat the market over time; these well-known anomalies include value, momentum, low volatility, and small size. (...) More grandly, EDHEC says its pricing aspires to shine a light on smart beta’s opportunity costs—namely, that these strategies can lag behind the benchmark, sometimes for long periods. Lower management fees are good news, of course, since research shows fees are the best predictor of future fund returns. Beyond management fees, though, Zieger says that “hidden costs” of smart beta accrue when certain factors trail the market. Such bouts of weak performance can tempt investors to unload their holdings before they can prove their worth. (...)"