Scientific Beta

Hedge Fund Journal: "There is a strong conviction that the rise of strategy indices makes transparency even more important (77.1% vs 11%) and that opacity undermines the credibility of reported track records (80.8% vs. 17.4%), in particular for new forms of indices."

Hedge Fund Journal 17/03/2014

"(...) Investors consider the provision of index transparency to be logical and indispensable. An overwhelming majority of respondents (85.2%) identify transparency as the best mitigator of conflicts of interest and only 12% view good index governance as sufficient to deal with these conflicts. Transparency is currently inadequate and seen to be so by investors. Only around a third of respondents are very (4.6%) or somewhat satisfied (30.3%) with the current level of transparency in the indexing industry. This perception is consistent with EDHEC-Risk Institute’s observations since, with a single exception, the index providers analysed as part of the study do not give access to the historical constituents of the indices, and for a significant number of smart beta indices, the methodologies described do not allow the indices to be replicated. Ultimately, 79.8% of respondents consider that the adequate level of index transparency is one allowing for historical (43.1%) or historical and live (36.7%) replication and only a tiny number (2.8%) are satisfied with disclosures designed to impart an understanding of the objectives and key construction principles of indices. There is a strong conviction that the rise of strategy indices makes transparency even more important (77.1% vs 11%) and that opacity undermines the credibility of reported track records (80.8% vs. 17.4%), in particular for new forms of indices. (...)"