Scientific Beta

ETF Strategy: "ERI Scientific Beta, an affiliate of the EDHEC-Risk Institute, and Fundlogic, the ETF platform of investment bank Morgan Stanley, have partnered to launch five smart beta ETFs on London Stock Exchange. The ETFs provide equity factor-based exposure to the US, Japan, developed Asia-Pacific ex-Japan, developed Europe, and emerging markets. The funds’ underlying indices, developed by ERI Scientific Beta, are each composed of six equally weighted sub-portfolios, each of which are designed to capture the long-run factor risk premia that are associated with one of the following factors: value, size (medium capitalisation), low volatility, high momentum, low investment, and high profitability."

ETF Strategy 12/01/2018

"(...) ERI Scientific Beta, an affiliate of the EDHEC-Risk Institute, and Fundlogic, the ETF platform of investment bank Morgan Stanley, have partnered to launch five smart beta ETFs on London Stock Exchange. The ETFs provide equity factor-based exposure to the US, Japan, developed Asia-Pacific ex-Japan, developed Europe, and emerging markets. The funds’ underlying indices, developed by ERI Scientific Beta, are each composed of six equally weighted sub-portfolios, each of which are designed to capture the long-run factor risk premia that are associated with one of the following factors: value, size (medium capitalisation), low volatility, high momentum, low investment, and high profitability. A high-factor-exposure (HFE) filter is also applied to each sub-portfolio, targeting the given factor tilt to improve its exposure relative to secondary factor tilts, thus reducing the size of the sub-portfolio from approximately 50% to 30% of the parent index. To assign their weightings, each sub-portfolio is subjected to five popular weighting schemes (maximum deconcentration, maximum decorrelation, efficient minimum volatility, efficient maximum sharpe ratio, and diversified risk weighted diversification) so as to diversify both firm- and weighting-scheme-specific risks. Each of these weighting schemes are equally weighted to arrive at the final sub-portfolio. (...)"