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Latest webinars from Scientific Beta

Inconsistent Factor Indices: What are the Risks of Index Changes? – Broadcast on 11 July, 2019

Frequent changes in index methodology are quite a common occurrence in the smart beta industry. Such changes can sometimes create inconsistencies between different product offerings across time and may affect factor definitions, factor selection, and portfolio construction principles.

In this context, transparency of changes in index offerings and methodologies is crucial because it allows investors to evaluate the quality of different index offerings. It is also important that the changes are consistent with investment objectives.

This webinar analyses the implications of inconsistencies for investors and will illustrate problems with industry practice using examples from recent index changes.

Topics covered include: • What do inconsistencies mean for investors? • Which inconsistencies exist in the industry? • Case study: What is the impact of index changes on performance? • The importance of being aware of the potential risks of index changes.

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The Risks of Deviating from Academically-Validated Factors Webinar – Broadcast on 13 June, 2019

Factor investing has never been as popular as it is today. However, with the propagation of this type of investment approach, the equity space is becoming increasingly saturated with more and more factors that are ever more removed from academically-grounded research. In a bid to maintain their apparent competitive advantage and to show that they are still delivering alpha, commercial index providers and asset managers have respectively embarked on a factor finding process that has resulted in the discovery of tens, hundreds or even thousands of factors.

However, proprietary factor definitions and analytic toolkits based on non-standard factor indices can lead to unintended exposures and misunderstandings surrounding the associated risk exposures.The further away they are from academically-validated research, the more spurious and redundant proprietary factor definitions may be.

This webinar, hosted by Felix Goltz, PhD, Research Director at Scientific Beta, discusses factor definitions used in investment products and analytic tools offered to investors and contrasts them with the standard academic factors. It also outlines why the methodologies used in practice pose a high risk of ending up with irrelevant factors.

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A More Robust Defensive Offering" Webinar – Broadcast on 4 April, 2019

Investors looking for defensive equity strategies want to participate in bull markets while protecting their capital in bear periods by limiting their losses relative to the cap-weighted index. The concern for capital protection leads equity investors to usually invest in Low Volatility or Low Beta strategies, the main objectives of which are to offer defensive payoff profiles and to benefit from superior risk-adjusted performance relative to cap-weighted indices.

The Scientific Beta approach, which allows investors to benefit from the "Low Volatility" factor reward and obtain a defensive portfolio based on modern portfolio theory and factor investing, is achieved through the Smart Beta 2.0 construction framework.

This Smart Beta 2.0 construction framework first selects stocks with low volatility, then applies a High Factor Intensity (HFI) filter to remove stocks with the lowest multi-factor scores and finally diversifies away idiosyncratic risks with a diversified weighting scheme. This approach delivers high factor intensity and good long-term risk-adjusted performance because it harvests the Low Volatility factor, which is known to provide an additional source of performance to the cap-weighted index over the long term, while maintaining positive exposures to other rewarded risk factors, thanks to the use of the HFI filter. Moreover, Scientific Beta's top-down approach gives investors the flexibility to select the solution that fits their investment objectives by offering them three different versions of defensive indices.

Scientific Beta's defensive offering is motivated by a strong belief that investors are not identical and that their investment objectives and constraints are different. This webinar reviews our defensive offering and notably the way we tackle negative factor interaction with the High Factor Intensity (HFI) filter.

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On the Importance of Taking Hidden Risks into Account for Factor Investing Webinar – Broadcast on 17 January, 2019

Despite all the advantages smart beta strategies can offer to investors, it is important that they be aware of some of the implicit risks that they are subjected to. The decisions on selecting smart beta strategies are often based more on fees and recent performance rather than analysing risks. As a result, the risk implications of smart beta strategies - which often drive this recent performance - are not fully understood.

Smart beta strategies are selected to provide explicit exposure to some well-rewarded factors (Value, Momentum, Low Volatility, Profitability, Low Investment, Size). These factors provide good risk-adjusted returns over the long-term but they are also exposed to a number of hidden or implicit risks that drive short-term performance and can therefore cause big disappointments for investors

These issues have notably been underlined in a recent Scientific Beta publication entitled "Misconceptions and Mis-selling in Smart Beta: Improving the Risk Conversation in the Smart Beta Space".

This webinar reviews why hidden risks are important for investors. It focuses on three important implicit risks that smart beta investors are subjected to, i.e.: market beta bias, sector risk and geographical risk. In this webinar, we will look at the impact of these risks and we will also review how the risk control options that allow investors to meet their fiduciary responsibility can be implemented

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Managing Sector Risk in Factor Investing Webinar – Broadcast on 18 December, 2018

Sector risk is an implicit bet investors take when investing in Smart Factor indices. Even if it is not a priced risk factor in the cross-section of expected returns, sector risk can nevertheless have a material impact on short-term performance.

In a new publication entitled "Managing Sector Risk in Factor Investing", Scientific Beta researchers focus on the implicit sector risk taken by smart factor indices and analyse the implications for their short- and long-term risk-adjusted performance.

In a new publication entitled "Managing Sector Risk in Factor Investing", Scientific Beta researchers focus on the implicit sector risk taken by smart factor indices and analyse the implications for their short- and long-term risk-adjusted performance.

Investors looking to manage short-term risks can use the sector-neutral risk control option offered on Scientific Beta indices. Using the sector-neutral risk option has a clear advantage in terms of relative risk-adjusted performance since information ratios are increased.

This webinar explains the benefits of applying sector neutrality and reviews the sector risk control option offered to investors by Scientific Beta.

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Measuring Factor Exposure Better to Manage Factor Allocation Better Webinar - Broadcast on 15 November, 2018

Factor investing offers a big promise. By identifying the persistent drivers of long-term returns in their portfolios, investors can understand which risks they are exposed to, and make explicit choices about those exposures.

When it comes to information about factors, providers offer analytic toolkits to identify the factor exposures of an investor's portfolio. However, these analytic tools do not employ academically grounded factors and their factor finding process maximises the risk of ending up with false factors. These non-standard factors also lead to mismeasurement of exposures and may capture exposure to redundant factors. In the end, analytic tools for investors do not deliver on the promise of factor investing and they also lack transparency.

Additionally, we may question the way in which the measurement of factor proxies is implemented. Most popular factor analysis tools used by investors deviate from the models used in research because they choose to use factor scores instead of betas. An additional problem is that the one-dimensional nature of factor scores does not take into account correlations across different factors. This leads to the double counting of the exposures of factors that are highly correlated. Lastly, many popular factor scores combine variables into composite factor scores. Combining factor scores into composite scores makes the mismeasurement problems worse as composites from skewed score distributions may be biased towards one of the variables.

This webinar reviews these issues of factor risk measurement and shows how these can be countered.

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Are the Benefits of Multi-Factor Investing Still There? Webinar – Broadcast on 2 October, 2018

In the past two years, the performance of factor strategies has not been as attractive as in the last ten years. Many commentators have concluded that factor crowding phenomena could be eroding the returns associated with traditional long-term rewarded factors. This webinar shows that the recent underperformance of multi-factor strategies is not necessarily related to factors, but is instead linked to non-explicit risks embedded in multi-factor indices or funds. Through its capacity to offer fiduciary options that allow investors to control these hidden or implicit risks, Scientific Beta, with its flagship High Factor Intensity Multi-Beta Multi-Strategy 6-Factor 4-Diversification Strategy offering, provides a simple and transparent response to the risk control objectives desired by investors.

Ultimately, the Scientific Beta Global High Factor Intensity Multi-Beta 6-Factor 4-Strategy Sector Neutral and Market Beta Adjusted indices, which correct the two main non-factor biases of smart beta indices, namely sector and market beta biases, have outperformed their cap-weighted counterpart every year for ten years with average annual outperformance of almost 4%.

This webinar allows these indices, and the non-factor risk-control arrangements associated with them, to be presented.

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A Critical Analysis of Bottom-Up Multi-Factor Portfolio Construction - broadcast on 1st February, 2018

ERI Scientific Beta's research teams recently published an important study that is critical of factor investing approaches that aim to maximise and control factor exposures through a bottom-up approach and in-sample optimisation. The 'Critical Analysis of Bottom-Up Multi-Factor Portfolio Construction' webinar will detail the conclusions of this study and examine factor exposure control and bottom-up versus top-down approaches. The webinar will also be the occasion to discuss the benefits that institutional investors can expect from dynamically allocating to smart factor indices, with a focus on efficiently reacting to changes in market conditions.

Speaker: Eric Shirbini, PhD, Global Research and Investment Solutions Director with ERI Scientific Beta.

The main points addressed in this webinar will be the following:
• What are the issues behind the bottom-up versus top-down debate?
• From beta to stock picking: do stock factor champions exist?
• What are the limits of bottom-up approaches?
• What method can be used to maximise the benefits of factor investing?

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Benefits of Multi Smart Beta Investing - broadcast on 15 December, 2017

In response to the limitations of cap-weighted indices, all Scientific Beta offerings stem from the same investment principles. The Smart Beta 2.0 framework provides the benefits of explicit risk control. The diversification of specific and unrewarded risks is a core part of the design of all of Scientific Beta's offerings. Not only does it reduce their specific volatility but it also improves their long-term risk-adjusted performance in comparison with traditional cap-weighted or non-diversified factor indices.

Speaker: Eric Shirbini, PhD, Global Research and Investment Solutions Director with ERI Scientific Beta.

Topics covered include:
• Investment Philosophy
• Principles of Multi-Beta Offerings
• The Performance of Scientific Beta Multi-Beta Offerings

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The Case for a Long/Short Multi-Factor Strategy - broadcast on 10 October, 2017

This webinar presents new research on how to harvest factor premia without suffering from market volatility.

This integrated approach breaks with the traditional practices of long/short factor investing, which often favour the maximization of in-sample returns and the long/short spread to the detriment of risk management practices. It also enables investors to have opportunities to leverage the performance offered by this kind of strategy in the most efficient way possible.

This webinar is hosted by Eric Shirbini, Global Research and Investment Solutions Director, ERI Scientific Beta and Benjamin Herzog, Quantitative Strategies Product Manager, Société Génerale Corporate Investment Banking.

Topics covered include:
• The limitations of traditional long/short approaches in smart beta and factor investing: Poor matching between the risk factor exposure of long and short legs, poor estimation of market beta.
• Robust market estimation of beta and improvement of the market neutrality of long/short strategies.
• Risk management as a source of performance. When leverage is better than spread.
• When displayed performance equals replicated performance: the importance of properly evaluating the cost of replicating L/S strategies.

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"Bottom-Up Versus Top-Down: What is the Best Method to Use for the Construction of Multi-Factor Indices?" Webinar broadcast on 9 March, 2017

In light of increasing investor interest in multi-factor solutions, product providers have recently been debating the respective merits of the "top-down" and "bottom-up" approaches to multi-factor portfolio construction. Our recent research shows that focusing solely on increasing factor intensity leads to inefficiency in capturing factor premia, as exposure to unrewarded risks more than offsets the benefits of increased factor scores. High factor scores in "bottom-up" approaches also come with high instability and high turnover.

Our approach considers cross-factor interactions in "top-down" portfolios through an adjustment at the stock selection level. This approach leads to higher levels of diversification and produces higher returns per unit of factor intensity. It dominates "bottom-up" approaches in terms of relative performance, while considerably reducing extreme relative losses and turnover.

The objective of this webinar is to compare "bottom-up" methodologies that rely on multi-factor score-weighting to build concentrated portfolios to achieve higher composite exposure across targeted factors with less concentrated "top-down" multi-factor approaches.

This webinar is hosted by Felix Goltz, Head of Applied Research, EDHEC-Risk Institute and Research Director, ERI Scientific Beta.

Topics covered include:
• Considering cross-sectional negatives of single factor indices, seeking maximum exposure to rewarded factors, portfolio concentration versus diversification; what are the issues behind the "bottom-up" versus "top-down" debate?
• From alpha to beta to stock picking: do stock factor champions exist?
• What are the limits of "bottom-up" approaches?
• Can we reconcile the "top-down" approach and consideration of cross-sectional negatives of single smart factor indices combinations?
• What method can be used to maximise the benefits of factor investing?

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Assessing the Crowding Hypothesis webinar broadcast on 12 January, 2017

Smart Beta strategies, as one of the strongest growth areas in investment management recently, have established a space in between traditional capitalisation-weighted (or "cap-weighted") passive investments and traditional (proprietary and discretionary) active management. Perhaps unsurprisingly, Smart Beta has drawn fierce criticism from both advocates of traditional active management and of traditional passive management.

Among such critiques, a recurring issue is the presumption of a risk of "crowding" in Smart Beta strategies. While crowding is commonly pointed to as a potential risk, it is rarely formalised or even defined. This absence of definition is an issue when none wants to draw founded conclusions. Indeed, if it is now clear how crowding is defined or how it can be measured, it is rather futile to talk about whether or not it has or will occur.

The main idea behind a crowding risk is that, as everyone knows about successful Smart Beta strategies and increasingly invests in them, flows into these strategies will ultimately cancel out their benefits. If an increasing amount of money starts chasing the returns to a momentum strategy for example, it is possible that the reward for holding this strategy - which has been documented with historical data - will ultimately disappear.

This webinar, hosted by Felix Goltz, Head of Applied Research, EDHEC-Risk Institute and Research Director, ERI Scientific Beta, addresses the insights to be gained from considering the economic rationale of factor premia and review the empirical evidence on crowding.

Topics covered include:
• What can be learnt from academic research on the development of risk premia factors?
• How to evaluate factor crowding risk
• What are the appropriate and inappropriate responses to factor crowding risk?

Please connect to this webinar by clicking below ERI Scientific Beta webcast - assessing the crowding hypothesis

Robustness of Smart Beta Strategies webinar broadcast on 20 December, 2016

There has been significant evidence that systematic equity investment strategies (so-called smart beta strategies) outperform cap-weighted benchmarks in the long run. However, it is important to recognise that performance analysis is typically conducted on back-tests which apply the smart beta methodology to historical stock returns. Concerning actual investment decisions, it is thus relevant to question how robust the outperformance is.

It is important to make a distinction between relative robustness and absolute robustness. A strategy is assumed to be ‘relatively robust’ if it is able to deliver similar outperformance under similar market conditions by aligning well with the performance of underlying factor exposure it is seeking and reducing unrewarded risks. Absolute robustness is the absence of pronounced state and/or time dependencies and a strategy shown to outperform irrespective of prevailing market conditions can be termed as robust in absolute terms.

This webinar, hosted by Eric Shirbini, Global Product Specialist at ERI Scientific Beta, reviews the importance of robustness for smart beta strategies and discusses how to measure and assess robustness in the performance analysis of smart beta strategies.

Topics covered include:
• What are the live performances of popular smart beta strategies?
• How can these performances be analysed?
• What tools can be used to measure the robustness of smart beta performances?
• Are past performances representative of future performances?

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Long-Term Rewarded Equity Factors: What Can Investors Learn from Academic Research?

Equity index products that claim to provide exposure to factors which have been well documented in academic research, such as value and momentum, among others, have been proliferating in recent years.

Interestingly, providers across the board put strong emphasis on the academic grounding of their factor indices. At the same time, product providers try to differentiate themselves using proprietary elements in their strategy, often leading to the creation of products using new factors or novel strategy construction approaches which may or may not be consistent with the broad consensual findings in the academic literature on empirical asset pricing. Moreover, discussion of the sources of performance is often based on provider-specific research rather than consensual findings in the academic literature.

This webinar, hosted by Felix Goltz, Head of Applied Research, EDHEC-Risk Institute and Research Director, ERI Scientific Beta, addresses 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.

Topics covered include:
• Analysing the main lessons from academic research on equity factors
• Addressing implementation costs and the question of crowding risks
• Discussing how practical implementation relates to the academic groundings

Please connect to this webinar by clicking below scientific beta webinar long term rewarded equity factors

10 Misconceptions in Smart Beta Investing webinar broadcast on 30 June, 2016

Smart beta strategies have been one of the strongest growth areas in investment management over the past decade. Such strategies have also drawn fierce criticism from providers of both traditional active management and traditional passive management. Smart beta providers are not only responding to such criticism, but have been vocal about the benefits of their respective approaches, without necessarily agreeing with each other.

Such debates have the potential to clarify the issues at hand by discussing the facts. Unfortunately, however, by often recurring to superficially convincing arguments that may not align well with the facts, such debates have also led to a number of misconceptions. Misconceptions about smart beta have arisen in different areas, such as performance drivers, investability issues and strategy design choices.

The objective of this webinar was to review ten common claims about Smart Beta and analyse the underlying misconceptions.

The webinar was hosted by Felix Goltz, Head of Applied Research at EDHEC-Risk Institute and Research Director at ERI Scientific Beta.

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The Limitations of Pure Factor Investing webinar broadcast on April 19, 2016

In a new research paper published in the Winter 2016 issue of the Journal of Portfolio Management, entitled "Diversified or Concentrated Factor Tilts?", ERI Scientific Beta has highlighted the limitations of purely factor-driven approaches that aim to concentrate portfolios in a small number of stocks that are highly exposed to one or more risk factors, in order to obtain, over the long term, the best possible return associated with these risk factors. Since it neglects diversification of specific risk, this factor concentration approach exposes the investor to high idiosyncratic volatility and ultimately delivers risk-adjusted performance that is inferior to that of well-diversified factor or multi-factor indices.

By Dr. Felix Goltz, Research Director at ERI Scientific Beta and Head of Applied Research at EDHEC-Risk Institute

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Smart Beta is Not Monkey Business webinar broadcast on March 29, 2016

Monkey portfolio proponents argue that all smart beta strategies generate performance that is similar to results obtained by any random portfolio strategy. We analyze these claims using test portfolios that follow commonly employed methodologies for explicit factor-tilted indexes. Our results show that smart beta strategies display exposure to a variety of factors, and there are pronounced differences in factor exposures across different strategies. An important implication of our results is that a careful assessment of investment philosophy and index design is indeed relevant as such strategies do not behave like monkey portfolios.

By Dr. Felix Goltz, Research Director at ERI Scientific Beta and Head of Applied Research at EDHEC-Risk Institute

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Quality Investing Webinar broadcast on September 21, 2015

Asset managers and index providers are increasingly touting the benefits of quality investing. Such strategies tilt portfolios to "high quality" stocks, as characterised for example by high profitability, stable earnings or low leverage, which are some of the variables used in practice. However, asset managers and index providers do not use a common definition of "quality," and a large variety of approaches exist.

For academics and defenders of a beta, rather than an alpha approach, which is, in our view, the only one compatible with index investment, "quality" refers to a whole new dimension: the factor approach. It is not about finding quality stocks that are possibly undervalued but about being exposed to stocks that present particular risk profiles that are well-rewarded in the long run.

This concept was addressed at a webinar entitled "Quality Investing" held on on Monday, 21 September.

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Robustness of Smart Beta Strategies Webinar broadcast on September 28, 2015

While investors consider robustness a crucial feature of smart beta strategies in equity investing, index providers typically offer little - if any - measurable insight on this issue. ERI Scientific Beta has developed a range of analytics to measure robustness, and tools to improve the robustness of smart beta strategies.

At a webinar entitled “Robustness of Smart Beta Strategies” held on Monday, 28 September, 2015, Eric Shirbini, Scientific Beta keynote speaker will show how performance reporting of smart beta strategies can be enhanced through a measurement of robustness, including the frequency of over- and underperformance, conditional performance analysis, and performance attribution methods.

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Head Office
1 George Street
Séverine Cibelly Tel. +33 493 187 863
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EDHEC-Risk Institute
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  • edhec research insights autumn 2018

    EDHEC Research Insights: Autumn 2018

    White papersMon, 19 Nov 2018

    In the latest Scientific Beta special issue of the Research Insights supplement to IPE, we first show that achieving robust exposure to long-term rewarded factors, good diversification of unrewarded risks, and high levels of investability are key requirements for adding value with factor indices. 

  • ipe edhec research insights spring 2018

    IPE/EDHEC Research Insights: Spring 2018

    White papersTue, 15 May 2018

    In this supplement, we document the hidden risks of priced risk factors in the equity space, assess the investability of smart beta equity strategies, review general insights from the literature on return estimation and factor models that are relevant for multi-factor portfolio construction…

  • edhec research insights autumn 2017 thumbnail

    IPE/EDHEC-Risk Institute Research Insights: Autumn 2017

    White papersThu, 2 Nov 2017

    This supplement covers the management of market risk in the design of factor indices, an investable long/short market-neutral multi-factor strategy, a leveraged beta one solution as a possible way to manage the exposure to the market factor, the merits of ‘top-down’ approaches compared to ‘bottom-up’ approaches, and the construction methodology of narrow high factor intensity smart factor indices, along with their performances as stand-alone indices.

  • ipe edhec risk institute research insights aut 2016 screenshot

    IPE/EDHEC-Risk Institute Research Insights: Autumn 2016

    White papersSat, 1 Oct 2016

    In this supplement, we clarify the conceptual underpinnings and the need for diversification in factor investing. We show that it is possible to reconcile environmental and financial objectives using low carbon indices. We analyse the benefits of multi-smart factor indices for emerging markets. On the subject of defensive solutions and indices, we look at the concepts underlying low risk equity strategies, introduce alternative approaches to limiting concentration in minimum and low ...

  • IPE-EDHEC Risk Institute Research Insights Autumn 2015

    IPE/EDHEC-Risk Institute Research Insights: Autumn 2015

    White papersWed, 30 Sep 2015

    We look at ‘quality’ investing and more specifically the role of two separate equity risk factors related to balance sheet characteristics: low investment and high profitability. We examine the nature of the relationship between the quality factor, or factors, and the value factor. We examine the robustness of the first generations of smart beta indices on the basis of live track records. We compare the results of smart factor indices with several stylised examples of concentrated factor ...

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