Scientific Beta

Investment Week: "Also highlighting concerns was platform provider ERI Scientific Beta, which released a report entitled Misconceptions and mis-selling in smart-beta: Improving the risk conversation in the smart beta space, where it said a number of index providers had failed to highlight the risks associated with smart-beta strategies to investors. Most notably, the report stressed it was important firms avoided the misrepresentation of backtested results, as they had been "heavily" influenced by conditions not necessarily related to the product."

Investment Week 24/10/2018

"(...) Also highlighting concerns was platform provider ERI Scientific Beta, which released a report entitled Misconceptions and mis-selling in smart-beta: Improving the risk conversation in the smart beta space, where it said a number of index providers had failed to highlight the risks associated with smart-beta strategies to investors. Most notably, the report stressed it was important firms avoided the misrepresentation of backtested results, as they had been "heavily" influenced by conditions not necessarily related to the product. It gave the example of low volatility and defensive strategies where performance in recent years had been driven by falling interest rates. "These undocumented risks can have a significant impact on performance. Documenting such risk exposures is crucial to reconcile them with investors' preferences," the report added. (...)"