Scientific Beta

Financial News: "EDHEC-Risk Institute plans to take a significant step in its campaign for greater transparency in the index industry by offering for free the methodology and composition of a variety of so-called "smart beta" strategies. The move is aimed at lifting the lid on the strategies, which attempt to use non-traditional or alternative benchmarks to outperform traditional market cap-weighted indices over the long term."

Financial News 15/03/2013

"(...) EDHEC-Risk Institute plans to take a significant step in its campaign for greater transparency in the index industry by offering for free the methodology and composition of a variety of so-called “smart beta” strategies. The move is aimed at lifting the lid on the strategies, which attempt to use non-traditional or alternative benchmarks to outperform traditional market cap-weighted indices over the long term. The move will also be a challenge to the current business model of index providers, who charge for access to this data. The research group said on Thursday it will release information about the methodology and components of popular smart beta indices that could allow firms that currently pay providers for that data to replicate the benchmarks on their own. EDHEC has spent about €5m over the last two years to acquire data and construct a number of smart beta indices. It has 25 people working on the project. EDHEC-Risk Institute director Noel Amenc said the information that firms marketing smart beta strategies currently provide is inadequate, that data on indices is too costly and that it is difficult to conduct independent research on smart beta given the way the market currently operates. He said: “We will show to index providers that they can survive with transparency.” He added: “If you’re in the index business, you should be totally transparent on the methodology. People should pay for services, not the secret.” The institute will provide information on the composition and methodology of more straightforward strategies for free and charge a subscription fee to recoup the cost of the data for businesses that want access to information on what it calls “Smart Beta 2.0” strategies. Those new strategies by EDHEC aim to identify - and control - the risks of more mainstream strategies. (...)"