Scientific Beta

IPE Asia: "According to EDHEC, these Smart Beta 2.0 indices shield investors from the risks to which the first generation of smart beta indices exposed them."

IPE Asia 03/05/2013

"(…) EDHEC stresses all indices would be selected "rigorously". It adds: "ERI Scientific Beta does not wish to promote strategies that are not based on a rigorously conceptual approach, but only those for which the past performance at least stems from a rigorous and transparent process where the risks have been documented and the methodology does not entail too many ad hoc choices." According to EDHEC, these Smart Beta 2.0 indices shield investors from the risks to which the first generation of smart beta indices exposed them. Amenc adds that each institution would be able to tailor its own benchmark by modifying the risk of the standard index, called the flagship index. "For instance," he says, "if a pension fund or an asset manager is interested in a global minimum variance index but is less so by the sector risk offered by this benchmark and prefers to be sector neutral, the platform will allow it to change those components." Tomas Franzén, chief investment strategist at Swedish buffer fund AP2 and chairman of EDHEC-Risk Institute's international advisory board, says the Scientific Beta initiative is a "major mover" of the whole concept of using equity indices. "It is important to better understand the dynamics of different alternative weightings and, at least, to be better prepared for market episodes when market-cap indices actually outperform." (…)"