Scientific Beta

Funds Europe: "Eric Shirbini, product specialist at ERI Scientific Beta, says that the real answer is we don’t know about a crash. Factors are cyclical. There are periods of time when they are going to hurt you; that’s what you’re being paid for, to hold through those times, he says."

Funds Europe 12/10/2016

"(…) A row broke out this year when a pioneer in the sector warned that as smart beta funds grow in size, certain products could go ‘horribly wrong’. Funds Europe looks at what lay behind the controversy – and asks what safeguards there are for investors. (...) Eric Shirbini, product specialist at ERI Scientific Beta, says that the real answer is we don’t know about a crash. Factors are cyclical. There are periods of time when they are going to hurt you; that’s what you’re being paid for, to hold through those times, he says. Like Asness, Shirbini says timing a cycle is difficult. Asness discusses two forms of factor timing: one is to hold less of a factor depending on market conditions; the other, more extreme form is to declare a previously useful factor “now forever gone”. However, Shirbini adds that factors are risk premia, the same as equities markets, so is it possible to time the stock market? Only with extreme difficulty and a huge amount of luck. (...)"