Scientific Beta

IPE: "EDHEC-Risk Institute has launched a smart beta index platform giving investors the ability to choose and control the risks of those benchmarks. According to EDHEC, the ERI Scientific Beta provides "total" transparency on the methodologies and compositions of the indices available on the platform."

IPE 30/04/2013

"(…) EDHEC-Risk Institute has launched a smart beta index platform giving investors the ability to choose and control the risks of those benchmarks. According to EDHEC, the ERI Scientific Beta provides "total" transparency on the methodologies and compositions of the indices available on the platform. Noël Amenc, director at EDHEC-Risk Institute and chief executive at ERI Scientific Beta, told IPE investors needed to understand the strategy of alternative indices and the risk associated with them. "Traditionally, index providers justify the use of alternative benchmarks and their price by saying they outperform cap-weighted indices," he said. "However, investors should be aware smart beta benchmarks can also have periods where they underperform. "The reason for this is not necessarily due to the fact these benchmarks are badly designed but simply because they are exposed to a series of risk factors, called beta." Amenc added that, as a result, investors should have access not only to the performance data provided by index providers but also to the risks to which those indices are exposed. With its new platform, EDHEC will therefore provide its own analysis on each smart beta index. The provision of information on the flagship indices includes daily transparency and allows all investors to replicate the indices without charge. Since last week, the institute has been offering 30 flagship indices, which represent popular smart beta strategies in the area of diversification. However, EDHEC hopes to offer style, fundamentally weighted, factor replication and optimal liquid indices in future. Amenc added that the platform would grow "extensively" in the coming months. In a year's time, ERI Scientific Beta intends to have around 100 free flagship indices representative of all the possible smart beta choices. (…)"