Content (29)
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White papersDo we Need Active Management to Tackle Capacity Issues in Factor Investing?
This paper shows that the claims by Blitz and Marchesini (2019), who question the investability of factor indices and argue that active management is needed to avoid capacity issues, do not hold for the following reasons:
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White papers
ESG Engagement and Divestment: Mutually Exclusive or Mutually Reinforcing?
What motivates equity ESG investment strategies is the ability to influence the behaviour of companies through the portfolio decisions that they lead to. To this end, it is often argued that an investor who is dissatisfied with a company’s ESG behaviour, and who wishes to remedy the situation, needs to stay on as its shareholder and engage with it.
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White papers
Crowding Risk in Smart Beta Strategies
A recurring criticism of smart beta strategies is the presumption of a risk of “crowding”. It is frequently pointed to as a potential risk but is rarely formalised or even defined.
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White papers
Overview: Designing More Defensive Solutions - A new solution that really is low volatility
Defensive equity solutions are popular strategies because they provide better downside protection while also delivering good risk-adjusted returns, since they are exposed to the Low Volatility risk premium. However, traditional defensive solutions suffer from some clearly identifiable drawbacks, notably negative exposures to other rewarded factors or a lack of diversification. In this publication, Scientific Beta details its robust dynamic defensive solution.
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White papers
Overview: Assessing the Robustness of Smart Beta Strategies
This is a detailed summary of the corresponding white paper that highlights the sources of a lack of robustness in the design of smart beta strategies and describes the methods employed by Scientific Beta to improve robustness. It also presents the protocol that Scientific Beta employs to measure robustness, through its four dimensions: conditional performance and risk analysis to various regimes; stability of performance and risk over time; robust statistical inference of the significance of a strategy’s outperformance; and out-of-sample testing to confirm robustness.
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White papers
Assessing the Robustness of Smart Beta Strategies
The paper discusses why robustness is relevant for investors in smart beta strategies and describes the sources of deficiencies. It further explains the need for robustness checks in performance analysis of such strategies and the various methods by which Scientific Beta improves robustness. It also discusses measurements of robustness and the protocol that we employ internally to assess the robustness of newly developed strategies. This toolkit of tests is quite relevant to investors and can be used in their evaluation of smart beta strategies.
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White papers
Unsustainable Proposals: A critical appraisal of the TEG Final Report on climate benchmarks and benchmarks’ ESG disclosures and remedial proposals
The 2019 update of the European Benchmark Regulation (Regulation (EU) 2019/2089, hereafter the “Regulation”) creates labels for Benchmarks that are on a decarbonisation trajectory or are aligned with the Paris Agreement under the United Nations Framework Convention on Climate Change (hereafter “Climate Benchmarks”).
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White papers
Improving Portfolio Diversification with Single Factor Indices
To improve the robustness of their portfolio, asset owners can either exploit the imperfect correlation between risk factors and try to have a more balanced or deconcentrated allocation to them or try to improve conditional diversification by considering exposures of risk factors to macroeconomic regimes.
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White papers
Overview: Improving Portfolio Diversification with Single Factor Indices
The overview provides a detailed summary of the corresponding paper that discusses how to implement a completeness portfolio using different case studies and illustrates the impact that it can have on an asset owner’s existing portfolios.
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White papers
IPE EDHEC Research Insights Autumn 2019
This Scientific Beta special issue of the Research Insights supplement to IPE contains articles on:
- Do factor indices suffer from price effects around index rebalancing?
- Explaining the poor performance of factor strategies over the last three years
- Does the size factor still have its place in multi-factor portfolios?
- Single factor indices with strong factor intensity
- Portfolio completeness with single factor indices
- Designing more defensive solutions
- Accounting for macroeconomic conditions in multi-factor allocation
- Adding value with factor indices
- Scientific Beta low carbon option
- Scientific Beta ESG option
- Scientific Beta enhanced ESG reporting -
White papers
Overview: How to Reconcile Single Smart Factor Indices with Strong Factor Intensity
This document is a detailed summary of the corresponding white paper presenting the investment principles, design and performance of Scientific Beta’s single smart factor indices that reconcile strong exposure to the desired factor tilt and high factor intensity as well as better long-term risk-adjusted performance.
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White papers
What Really Explains the Poor Performance of Factor Strategies over the Last 3 Years?
This publication shows that recent underperformance is not the result of a deterioration in factor performance, since it has been possible to offset negative performance for some factors through the good performance of other factors, but relates more to the implementation choices of the factor exposures than to the factors themselves. For instance, in the last 3 years, the non-control of market beta exposure in a bull market context has prevented factor indices from benefitting fully from the important market risk premium.
