Scientific Beta

Institutional Investor: "A top European academic institution known for analyzing factor-based investing has attacked a Mercer report for "undocumented opinions" on the strategy that risk misinforming investors. In a paper this month, EDHEC-Risk Institute’s scientific beta division blasted Mercer’s November report on "Factor Investing: From Theory to Practice," accusing the consultant of putting its commercial interests ahead of evidence-based research."

Institutional Investor 10/01/2018

"(...) A top European academic institution known for analyzing factor-based investing has attacked a Mercer report for "undocumented opinions" on the strategy that risk misinforming investors. In a paper this month, EDHEC-Risk Institute’s scientific beta division blasted Mercer’s November report on "Factor Investing: From Theory to Practice," accusing the consultant of putting its commercial interests ahead of evidence-based research. The investment consultant's beliefs "align nicely with their bottom line but not so much with the bottom lines of end-investors," Noël Amenc, chief executive officer of ERI Scientific Beta and Frédéric Ducoulombier, associate professor of finance at the EDHEC-Risk Institute, said in the paper. They took aim at Mercer's suggestion that investors who use traditional quantitative strategies review their holdings against comparable actively managed multi-factor strategies, as it's possible to find "well-constructed, active, multi-factor strategies"with similar factor biases but cheaper. "There is no basis for preferring actively managed to systematic multi-factor strategies for quantitative strategy substitution applications," the authors of the EDHEC-Risk Institute paper wrote. "It is particularly distressing to see an advisor that also sells active investment management dismiss systematic strategies and reintroduce alpha into smart beta." (...)"