Scientific Beta

Financial Standard: ""Respondents appear to have major concerns about the quality of these products," the EDHEC-Risk Institute "Investor Interest in and Requirements for Smart Beta ETFs" report concluded.""

Financial Standard 24/06/2015

"(...) Investors fear that smart beta indices lack full transparency on methodology and risk analytics, global research found. "Respondents appear to have major concerns about the quality of these products," the EDHEC-Risk Institute "Investor Interest in and Requirements for Smart Beta ETFs" report concluded. It found that 88% of the investors surveyed think that smart beta indices require full transparency on methodology and risk analytics. "Unfortunately, these indices' low level of transparency, which is routinely justified by the use of proprietary models, makes the evaluation of risks difficult," the report said. Investors also expressed concern at the transparency of "ETFs that track the most complex indices, and that are sold primarily for their outperformance." However, satisfaction with smart beta ETFs is high, with 74% of investors declaring they are satisfied. When asked about their list of priorities for future product development in the ETF space, smart beta ETFs dominate the list of top items and was mentioned by 37% of investors. Ease of implementation, low turnover and transaction costs were rated 3.66 on a scale from 0 to 5. Rational risk premium was rated at 3.61 and documentation of the factor premium in empirical literature at 3.45. (...)"