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Noel Amenc, ERI

Assets replicating Scientific Beta’s multi-factor indices reach USD43bn


Assets tracking Scientific Beta’s smart beta indices reached USD43 billion at 31 December 2018, an increase of USD18 billion (72 per cent) on the 31 December total.

Scientific Beta says the growth has been by its multi-factor offerings. The Scientific Beta Multi-Beta Multi-Strategy Four-Factor EW indices, which were the first multi-factor indices to be offered by the company, show an average live annualised outperformance across all Scientific Beta Developed regions of 1.49 per cent over their five-year live track record and an improvement in Sharpe Ratio of 52.36 per cent compared to their cap-weighted benchmark.
Noël Amenc (pictured), CEO of Scientific Beta, says: “We have been very pleased with the continued growth of our assets under replication in conditions that were not necessarily favourable for some factor strategies. We are continuing to highlight the importance for our clients of risk management in the factor space.”
“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, like for example sector risk or even a market beta bias. These risks can therefore cause big disappointments for investors if they are not understood and possibly managed.
“These issues have 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. One of our success factors is to analyse these risks, make them explicit and allow investors to hedge them or not depending on their fiduciary objectives and constraints.”

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