Scientific Beta

Funds Europe: "He adds that the lower trading cost, combined with the lower risk of diversifying across smart factors indices that are not perfectly correlated to each other, are the two main reasons why investors are better off using this blended approach."

Funds Europe September 2015

"(…) The next stage of development in the smart beta world is underway, with investors looking to combine investment factors – such as low volatility, value, and momentum – into their portfolios. Amundi, for example, recently launched a global equity multi-smart beta ETF based on indices created by academics associated with the EDHEC-Risk Institute that track four factors: volatility, valuation, size and momentum. (...) Eric Shirbini, global product specialist at ERI Scientific Beta, the smart beta index venture of the EDHEC-Risk Institute, says investors like Amundi invest in its combined index only after all the trades have been netted out. “If one of the smart beta indices is selling the same stock as another smart beta is buying in exactly the same proportion, then there is no trade at the composite index level and therefore no trading cost for the investor.” He says that compared to a multi-beta fund that manages the individual smart beta strategies separately, netting saves an investor 5% to 7% in “one-way turnover” per year. He adds that the lower trading cost, combined with the lower risk of diversifying across smart factors indices that are not perfectly correlated to each other, are the two main reasons why investors are better off using this blended approach. (...)"