Scientific Beta

ETF Strategy: "While in practice many investors choose specific factor exposures according to their investment beliefs, objectives and constraints, the benefits of multi-factor allocations by way of an equal-weighted or equal relative risk contribution allocation are sizable, according to ERI Scientific Beta."

ETF Strategy 27/05/2014

"(...) ERI Scientific Beta, the smart beta indexing initiative spun out off EDHEC-Risk Institute, a Paris-headquartered financial research centre, has announced the launch of the SciBeta Multi-Beta Multi-Strategy Indices. The indices endeavour to address two potential limitations of market capitalisation-weighted indices, namely ill-suited exposures to systematic risk factors and excessive concentration in a small number of stocks. The indices provide allocations to a selection of equity market risk factors – value, momentum, size and low volatility – that are very well rewarded over the long term. Within each factor tilt, ERI Scientific Beta applies a “smart” weighting methodology to selected stocks so that the indices are not only exposed to the relevant factor, but also well diversified. The indices also benefit from the lack of correlation between the premia associated with these factors, because they correspond to different economic cycles. While in practice many investors choose specific factor exposures according to their investment beliefs, objectives and constraints, the benefits of multi-factor allocations by way of an equal-weighted or equal relative risk contribution allocation are sizable, according to ERI Scientific Beta. (...)"