Scientific Beta

Index Universe: "EDHEC-Risk Institute is set to offer investors free access to data on a wide range of so-called "smart beta" indices, in a move that is likely to put major pressure on commercial index providers’ business models."

Index Universe 15/03/2013

"(...) EDHEC-Risk Institute is set to offer investors free access to data on a wide range of so-called "smart beta" indices, in a move that is likely to put major pressure on commercial index providers’ business models. EDHEC-Risk, the financial research institute of France-based EDHEC business school, says it will shortly publish a wide range of data covering popular smart beta equity indices on a new website, scientificbeta.com. The launch, which is expected to take place in the second quarter of this year, is part of a broader drive by EDHEC-Risk for increased transparency in the indexing sector. Earlier this week the institute said that regulators should insist on the full transparency of financial benchmarks to allow index users to assess the risks they incur. Smart beta indices are indices that depart from the traditional methodology of weighting constituents by their market size. The smart beta category includes a wide range of construction techniques, including low-volatility, minimum variance, fundamental indexation, and value and momentum “factor” indices. Smart beta is attracting significant interest from investors disillusioned by the high cost of active management and interested in pursuing similar strategies in a low-cost, replicable index format. However, smart beta indices have up to now been offered on a commercial basis by traditional index firms, who charge licensing fees for access to index information, including performance, constituent and weighting data, construction methodologies and risk metrics. Such licensing fees are often charged on the basis of a percentage share of assets under management, often amounting to multi-million revenues for the firms concerned. By contrast, EDHEC says it will shortly give investors free access to the information and data used in over thirty popular smart beta strategies. (...)"