Scientific Beta

Benefits and Pensions Monitor: "Performance drivers and strategy design choices are among the mistaken claims about smart beta that present risks for investors, says research from the EDHEC Risk Institute. The performance driver claims include beliefs that smart beta generates alpha and anything beats cap-weighted market indices."

Benefits and Pensions Monitor 25/07/2016

"(...) Performance drivers and strategy design choices are among the mistaken claims about smart beta that present risks for investors, says research from the EDHEC Risk Institute. The performance driver claims include beliefs that smart beta generates alpha and anything beats cap-weighted market indices. It says investability hurdles claims include liquidity concerns that smart beta requires positions to be held in highly illiquid stocks and that smart beta necessarily leads to high turnover. And strategy design choices state a good factor index should provide a strong tilt to the desired factor, requires a sophisticated scoring approach, and needs to isolate exposure to the target factor. The research suggests that, more often than not, superficially convincing claims about smart beta strategies stand on shaky foundations. (...)"