Scientific Beta

Global Investor: "A considerable number of investors have concerns regarding smart beta exchange-traded funds (ETFs), despite most investors in the products being pleased with their purchase, according to the EDHEC-Risk Institute. Lack of transparency in particular remains a key concern."

Global Investor 24/06/2015

"(...) EDHEC-Risk Institute finds that low level of transparency, which is routinely justified by the use of proprietary models, makes the evaluation of risks difficult. (...) A considerable number of investors have concerns regarding smart beta exchange-traded funds (ETFs), despite most investors in the products being pleased with their purchase, according to the EDHEC-Risk Institute. Lack of transparency in particular remains a key concern. "While transparency is important for market indices (i.e. indices that aim to represent a given market or segment), it is all the more so for smart beta indices. Indeed, while these new forms of indices can provide investors with improved risk-reward profiles or other benefits, they bring distinct risks of their own," stated the report. "Unfortunately, these indices’ low level of transparency, which is routinely justified by the use of proprietary models, makes the evaluation of risks difficult." Most of the survey respondents (88%) agreed that smart beta indices require full transparency on methodology and risk analytics. (...)"