Scientific Beta

Financial Advisor: " “With smart beta, the quality of index construction becomes a more important aspect when you look at returns and risk-adjusted returns. We believe ERI Scientific Beta has come up with the most robust ideas in this space.”

Financial Advisor 18/04/2016

"(...) Global X, a New York-based fund manager, has taken an entirely different approach—creating a bundle of indexes based on individual factors based on academic metrics, then combining those indexes into funds that encompass multiple factors and weighting approaches. As a result, Global X’s Scientific Beta suite of ETFs addresses several shortcomings in many smart beta funds through strategies designed using research from the EDHEC-Risk Institute, a French financial research and education institution. (...) The concept is simple, says Eric Shirbini, global product specialist at EDHEC-Risk Institute’s Scientific Beta division in London—it is to create indexes that give investors exposure to market risk and returns, or beta, plus an additional risk premium. “Academic research has shown that there are some risk premiums that provide a return over and above the market average,” Shirbini says. “By taking exposure to certain risks, you can get higher returns than the market. That’s what factor investing is all about.” (...) “A multi-factor index gives you a great deal of transparency,” Shirbini says. “You can look at each individual component and understand what comes on with your investment, which factor is working at which time. It makes the process easy to break down.” While the EDHEC strategy might sound complicated, Shirbini says at heart it’s just a combination of simple measures working in tandem that should lead to smart beta’s end point: capturing the heart of the market’s positive performance while limiting risks. (...) “We think it’s a huge advantage to be able to match academic research with the democratization of funds,” Jacobs says. “For us, it comes down to the quality of the index itself, finding a liquid index that you can pay a minimal amount of basis points for access. With smart beta, the quality of index construction becomes a more important aspect when you look at returns and risk-adjusted returns. We believe ERI Scientific Beta has come up with the most robust ideas in this space.” (...)"