Scientific Beta

Funds Europe: "The emergence of smart beta indices is directly linked to the new investment idea of ‘risk allocation’, as Felix Goltz of EDHEC-Risk Institute explains. Cap-weighted indices have been widely criticised in passive investment, but in actual fact, they would be truly optimal if the Capital Asset Pricing Model (CAPM) were true and the indices reflected the true market portfolio. Neither of these conditions is borne out in practice."

Funds Europe 10/06/2016

"(…) The emergence of smart beta indices is directly linked to the new investment idea of ‘risk allocation’, as Felix Goltz of EDHEC-Risk Institute explains. Cap-weighted indices have been widely criticised in passive investment, but in actual fact, they would be truly optimal if the Capital Asset Pricing Model (CAPM) were true and the indices reflected the true market portfolio. Neither of these conditions is borne out in practice. Such criticism is the starting point for smart beta strategies. There are two angles that can be taken and both correspond to sides of the same coin – the inefficiency of cap-weighted indices. (...)"