About Scientific Beta
Scientific Beta aims to be the first provider of a smart beta indices platform to help investors understand and invest in advanced beta equity strategies.
Established by EDHEC-Risk Institute, one of the very top academic institutions in the field of fundamental and applied research for the investment industry, Scientific Beta shares the same concern for scientific rigour and veracity, which it applies to all the services that it offers investors and asset managers.
The Scientific Beta offering covers three major services:
• Scientific Beta Indices
Scientific Beta Indices are smart beta indices that aim to be the reference for the investment and analysis of alternative beta strategies. Scientific Beta Indices reflect the state-of-the-art in the construction of different alternative beta strategies and allow for a flexible choice among a wide range of options at each stage of their construction process. This choice enables users of the platform to construct their own benchmark, thus controlling the risks of investing in this new type of beta (Smart Beta 2.0).
Within the framework of Smart Beta 2.0 offerings, Scientific Beta provides access to smart factor indices, which give exposure to risk factors that are well rewarded over the long term while at the same time diversifying away unrewarded specific risks. By combining these smart factor indices, one can design very high performance passive investment solutions.
• Scientific Beta Analytics
Scientific Beta Analytics are detailed analytics and exhaustive information on its smart beta indices to allow investors to evaluate the advanced beta strategies in terms of risk and performance. The analytics capabilities include risk and performance assessments, factor and sector attribution, and relative risk assessment. Scientific Beta Analytics also allow the liquidity, turnover and diversification quality of the indices offered to be analysed. In the same way, analytics provide an evaluation of the probability of out-of-sample outperformance of the various strategies present on the platform.
• Scientific Beta Fully-Customised Benchmarks and Smart Beta Solutions is a service proposed by Scientific Beta, and its partners, in the context of an advisory relationship for the construction and implementation of benchmarks specially designed to meet the specific objectives and constraints of investors and asset managers. This service notably offers the possibility of determining specific combinations of factors, considering optimal combinations of smart beta strategies, defining a stock universe specific to the investor, and taking account of specific risk constraints during the benchmark construction process.
With a concern to provide worldwide client servicing, Scientific Beta is present in Boston, London, Nice, Singapore and Tokyo. As of December 31, 2018, there was USD 43bn in assets replicating Scientific Beta indices. 35% of these assets under replication are ESG-compliant. Scientific Beta has a dedicated team of 52 people who cover not only client support from Nice, Singapore and Boston, but also the development, production and promotion of its index offering. Scientific Beta signed the United Nations-supported Principles for Responsible Investment (PRI) on September 27, 2016.
News from Scientific Beta
Academic Lessons on Factor Investing download
This paper analyses what academic research has to say on equity factors. Our objective is to understand which lessons we can learn from such research in terms of designing and evaluating factor indices. When analysing academic publications on equity factor investing, five important lessons emerge, which provide useful perspective on practical questions about factor indices.
News from IPE
Investors will be able to assess net returns arising from smart beta strategies through a new transaction cost measurement approach put forward by a research paper from EDHEC Risk Institute. Currently, smart beta providers do not routinely report transaction cost estimates for their strategies, and performance evaluation often ...
ERAFP set to award seven mandates to replace agreements expiring next year
Provider will only charge clients for outperformance against reference portfolio
Focus switches from risk management to improving returns, BlackRock says
Asset manager views alternative risk premia as ‘core element’ of new investment approach
White Papers / Research from Scientific Beta
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 ...
Overview: Scientific Beta ESG Option – Upholding Global Norms and Protecting Multifactor Indices against ESG Risks
The incorporation of environmental, social and governance (ESG) dimensions into investment management has traditionally been associated with values-based and socially responsible investment (SRI), whose footprint in the investment management industry long remained relatively modest. However, assets managed with consideration of ESG dimensions have grown massively in the last 15 years, topping USD30 trillion in main markets by the beginning of 2018 (GSIA, 2019), and ESG incorporation ...
Scientific Beta Low Carbon Option – Supporting the Transition to a Low Carbon Economy and Protecting Multifactor Indices against Transition Risks download
The Low Carbon fiduciary option applicable across Scientific Beta’s flagship offering allows ethical and socially responsible investors to dissociate from companies with significant coal involvement and further promote the transition to a low carbon economy by reorienting their investments towards less carbon-intensive activities and companies.
Tackling the Market Beta Gap: Taking Market Beta Risk into Account in Long-Only Multi-Factor Strategies download
The paper argues that more attention ought to be paid to market exposure when conducting analyses of smart beta strategies and points out that most research proposing new multi-factor investment methodologies essentially ignores exposure to the market factor, which is the most consensual among all factors and often the most influential factor for a strategy.
Scientific Beta Enhanced ESG Reporting – Supporting Incorporation of ESG Norms and Climate Change Issues in Investment Management
Introduced in July 2019, Scientific Beta’s Enhanced Environmental, Social and Governance (ESG) Reporting is intended to assist investors in meeting the challenges and seizing the opportunities of the incorporation of ESG dimensions into passive investment management.
Analysis from IPE
An increasing number of institutional investors are interested in investments with an environmental, social and/or governance (ESG) focus.
Academic studies have cast doubt on the existence of a premium for investing in small-cap stocks
The ability of stocks with certain investment characteristics to outperform the market has been well understood and documented for decades. But options of how to implement this strategy were limited
A constructive challenge or threat for hedge funds?
Equity ETFs are still more popular, but fixed income products are catching up