Scientific Beta

FT Adviser: "ERI Scientific Beta’s own research, called ‘Smart Beta is not Monkey Business’, claims smart beta-style constructed indices do not just randomly beat traditional market performance, nor could a monkey generate similar performance through a random selection of stocks."

FT Adviser 20/04/2016

Guide to smart beta
"(...) ERI Scientific Beta’s own research, called ‘Smart Beta is not Monkey Business’, claims smart beta-style constructed indices do not just randomly beat traditional market performance, nor could a monkey generate similar performance through a random selection of stocks. Instead, the ERI paper used test portfolios following particular methodologies for constructing indices. Far from being random, smart beta-style portfolios which were constructed with a careful assessment of investment philosophy and index design would indeed help your customers achieve their goals. (...)"

Advantages of using smart beta strategies
"(...) By using smart beta, investors can gain exposure to their desired index, without suffering as a result of correlation to the index performance. Eric Shirbini, global product specialist for ERI Scientific Beta, says one key advantage is better performance than a standard cap-weighted index for the same level of risk, but said investors needed to have a longer time frame in mind. He explains: “It is important to point out this improvement in performance will only materialise over a long time horizon.” (...) There’s also the benefit of diversification across multiple factor smart-beta products, rather than sticking to just one strategy, as Mr Shirbini points out: “The performance improvement for smart multi-beta products comes sooner than for a smart beta index only exposed to a single factor.” (...)"

How to use smart beta for retail clients
"(...) For Eric Shirbini, global product specialist for ERI Scientific Beta, the killer argument for smart beta is cost. He says: “Advisers need to inform their clients smart beta is a more cost-effective means of generating better performance than the market cap-weighted index, compared with actively managed portfolios.” (...)"

What’s in a name?
"(...) These can be called ‘fundamentals’ or ‘factors’ or ‘tilts’ or even ‘style’ – but basically these rules will be applied to the construction of an index, or an index-tracking product such as an exchange-traded fund. Says Eric Shirbini, global product specialist for ERI Scientific Beta, “Smart beta is an index constructed with clearly defined and transparent rules”. (...)"