Scientific Beta

Index Universe: "EDHEC Risk Institute is launching a new index service, offering free access to detailed information on 30 smart beta strategies. Paul Amery, editor of IndexUniverse.eu, asked Noël Amenc, CEO of ERI Scientific Beta, to explain the objectives of the initiative."

Index Universe 22/04/2013

"(…) We’ve been researching benchmark construction for years and we believe that a large part of the performance an investor receives ultimately comes down to the quality of the benchmark. For the last decade many people have been talking about alpha and how to add value through manager skill. Obviously alpha is interesting, but the first-order question for most asset managers and institutional investors is which beta, that is which benchmark to choose. Although we are an academic institution, we differ from some other academics in that we consider a good research paper to be only a starting point. The research should be useful for practitioners and it is our duty to make the research available to practitioners in the best conditions possible. More recently we packaged some of our research into alternative weighting methodologies into indices, and we partnered with FTSE in 2010 to launch a risk-efficient index series. We had requests from a lot of institutional investors to explain our methodology and to disclose the data behind the indices, in order to help them compare our strategy with other smart beta indices. But we were constrained from sharing this information by the rules of the traditional index business, which do not allow for such sharing of data. So in the launch of our new ERI Scientific Beta venture, which is an open platform, we are seeking to do two things: first, to base the choice of the numerous strategies that we are offering on our platform on academic rigour; and, second, to allow people access to the underlying information so that they can perform their own due diligence. (...)"