Scientific Beta

Investment Week: "For example, in the context of the Volkswagen scandal, the report looked at the SciBeta Extended Europe Multi-Beta Multi-Strategy EW and found it to be far more diversified than the two previously mentioned. As a result, it managed to protect returns in the week of the scandal, outperforming both the aforementioned factor strategies and the Stoxx Europe 600."

Investment Week 16/11/2015

"(...) A recent study conducted by EDHEC Risk Institute has highlighted a number of issues inherent in risk factor-based products in particular, which it said are often highly concentrated in order to achieve promised returns. These types of strategies allow investors to gain exposure to various risk factors, such as value, momentum and size, but the study revealed these indices often do so at the expense of portfolio diversification. The report, entitled The limitations of factor investing: Impact of the Volkswagen scandal on concentrated versus diversified factor indices, looked specifically at the exposure of such indices to Volkswagen, as the stock suffered significant falls in September. The research used the example of two factor-weighted indices – J.P. Morgan Europe Multi-Factor and MSCI Europe Diversified Multi Factor – and found they were both far more exposed to Volkswagen than the traditional Stoxx Europe 600. As a result, the performance of both strategies suffered more than the traditional index in the week of the emissions scandal. There is no need to despair, however, as not all factor indices suffer from the same problem. For example, in the context of the Volkswagen scandal, the report looked at the SciBeta Extended Europe Multi-Beta Multi-Strategy EW and found it to be far more diversified than the two previously mentioned. As a result, it managed to protect returns in the week of the scandal, outperforming both the aforementioned factor strategies and the Stoxx Europe 600. (...)"