Scientific Beta

ETF Trends: "On a recent webcast, How Smart Beta is Getting Smarter and Why Advisors Should Pay Attention, Eric Shirbini, Global Product Specialist at ERI Scientific Beta, highlighted some shortcomings associated with market cap-weighted index funds, including a tilt toward unrewarded factors and low level of diversification, which may lead to less desirable risk-adjusted returns."

ETF Trends 05/05/2016

"(...) Exchange traded funds (ETFs) that implement smart-beta strategies help investors move away from traditional market-cap methodologies to generate better returns without paying for the high costs associated with an active manager. On a recent webcast, How Smart Beta is Getting Smarter and Why Advisors Should Pay Attention, Eric Shirbini, Global Product Specialist at ERI Scientific Beta, highlighted some shortcomings associated with market cap-weighted index funds, including a tilt toward unrewarded factors and low level of diversification, which may lead to less desirable risk-adjusted returns. Consequently, fund providers have worked with indexers to create smart-beta indices to address the problems. In the beginning, we saw so-called smart-beta 1.0 solutions, or strategies with a single factor tilt, like value or equal weight. Now, the industry has come out with smart-beta “2.0” indices that utilize factors based on well established empirically rewarded factors and multi-weighting strategies that weight components to maximize diversification. (...)"