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EDHEC-Risk Information

EDHEC-Risk in the Press

EDHEC-Risk Institute has been cited widely in the business and industry press. A selection of articles may be found below.

[2016] [2015] [2014] [2013] [2012] [2011] [2010] [2009] [2008] [2007] [2006] [2005] [2004] [2003]


June 2017

  • Project M (22/06/2017)
    Mass-tailoring investment and retirement solutions
    "(...) The current environment, with years of persistently low or negative interest, is challenging the portfolio management of both corporate and private investors and the question of how to use the available risk budget gaining ever more importance. Lionel Martellini, the director of EDHEC-Risk Institute, believes this situation requires a “true start of the industrial revolution in investment management.” In his recent blog, “Thoughts on the Future of the Investment Management Industry,” Martellini wrote about new challenges in institutional and individual money management. These include a need to transition from investment products to investment solutions, and the increased importance of liability-driven investment (LDI) strategies. (...)"
    Copyright Allianz [Full text]


  • Investment Week (21/06/2017)
    EDHEC: 94% of investors plan to up smart-beta exposure
    "(...) The firm's European ETF and Smart Beta Survey 2016, which polled 211 European investment professionals with significant assets under management, found 94% are planning to raise their allocation to smart-beta in the next three years in order to improve the performance of portfolios and manage risk. (...) Noël Amenc, professor of finance at EDHEC-Risk Institute and CEO of ERI Scientific Beta, said: "These results indicate investment in smart-beta will increase in the coming years, not only in numbers of investors, but also in terms of assets for each investor, which is not surprising as the current share of investment dedicated to smart-beta strategies is relatively restricted for a majority of respondents." (...)"
    Copyright Incisive Business Media (IP) Limited [Full text]


  • L'Agefi Suisse (21/06/2016)  
    Scientific Beta: le provider accentue les expositions
    "(...) Scientific Beta a annoncé hier la commercialisation d’une nouvelle série d’indices de facteur unique à exposition élevée. Tout en offrant une exposition plus forte que la moyenne vis-à-vis de facteurs spécifiques, ces indices demeurent diversifiés grâce à une méthodologie de pondération issue de l’approche multi-stratégie... (...)"
    Copyright L'Agefi Suisse [Full text - French - Registration required]


  • ETF Strategy (20/06/2017)
    Scientific Beta releases narrow factor index series
    "(...) ERI Scientific Beta has announced the launch of a new series of indices that target narrow exposure to a range of single factors. The narrow high factor exposure index family consists of 90 separate indices, each covering one of 15 regions and one of six factors. The single factors on offer are low volatility, mid-cap, value, high momentum, high profitability and low investment. The regions represented include the US, developed and emerging Asia Pacific, Europe, Japan, the UK and global. The indices also feature a High Factor Exposure filter, which, while maintaining the single factor tilt, seeks to eliminate stocks that have poor exposures to the other factors. Professor Noel Amenc, CEO, ERI Scientific Beta, commented: “These indices, which we have been using since December 2016 for dedicated factor allocation solutions, correspond to two main usages in the factor overlay framework. They either allow the value of a tactical bet on a factor to be maximised or the factor biases of a pre-existing allocation to be corrected in a highly efficient way.” (...)"
    Copyright ETF Strategy Ltd [Full text]


  • Le Monde (19/06/2017)  
    Classement des masters en finance : la razzia des écoles françaises
    "(...) D’abord, la consécration de l’EDHEC, 4ème en 2016 et qui détrône cette année HEC, en tête l’an dernier et 2ème cette fois. Là non plus, pas de hasard : cela fait une bonne quinzaine d’années que l’école laboure avec constance et méthode le sillon de la finance. L’EDHEC a beaucoup misé sur son pôle spécialisé, l’EDHEC Risk Institute (ERI), sous la conduite de Noël Amenc, directeur de ce pôle. Sa stratégie : développer une recherche ayant de l’impact sur les entreprises. La réussite est incontestable : aucune institution française n’a réussi à tisser des liens aussi étroits avec les entreprises du secteur. Il suffit pour s’en convaincre de voir comment sont suivies les conférences données à Londres ou ailleurs par les experts de l’ERI. Lequel a aussi donné naissance à une nouvelle structure, ERI Scientific Beta, qui est devenue un des leaders mondiaux du design et de la production d’indices alternatifs aux indices traditionnels de marché. Les indices de l’ERI SB sont désormais utilisés par les principales institutions financières internationales, comme BlackRock, Goldman Sachs, Merrill Lynch, Morgan Stanley, Nomura ou Société Générale. Ce pôle finance est ainsi devenu le joyau de l’EDHEC. (...)"
    Copyright Le Monde [Full text - French]


  • Financial Times (18/06/2017)
    More women join financial industry but salaries are not equal
    "(...) French business schools top the 2017 ranking. EDHEC Business School, based in Lille and Nice, leads the field for the first time. (...) Finance is one of top school EDHEC’s core strengths, both in terms of teaching and research. The school in 2001 established the EDHEC-Risk Institute to produce and distribute research on areas such as asset and risk management. Alumni from EDHEC have the 11th highest average salary, at $105,000, behind the alumni from Sloan at $143,600. They also enjoyed the seventh-highest salary increase, at 79 per cent. However, its alumni are the most mobile internationally, with 85 per cent of the class of 2014 having worked abroad. The school is also second for its international course experience. More than four in five of its latest graduating cohort went on an internship abroad and over half studied in another country for more than a month. (...)"
    Copyright The Financial Times Ltd [Full text]


  • Funds Europe (14/06/2017)
    SMART BETA RESEARCH: The only free lunch
    Article by Noël Amenc, CEO, ERI Scientific Beta, professor of finance, EDHEC-Risk Institute; and Felix Goltz, research director, ERI Scientific Beta, and head of applied research at EDHEC-Risk Institute
    "(...) Academics from EDHEC-Risk Institute explain how the wrong approaches to smart beta could lead to the loss of diversification. Smart beta was initially conceived as a response to two drawbacks of market-cap indices. The first drawback is that such portfolios typically provide limited access to long-term rewarded risk factors such as size or value, among others. The second problem is that they do not efficiently diversify unrewarded risks due to excessive concentration in the largest market-cap stocks. However, in recent years, the question of diversification has taken a back seat to the question of appropriate factor tilts, which has become the prime concern of smart beta providers. Positive exposure to rewarded factors is obviously a strong and useful contributor to expected returns. However, products that aim to capture explicit risk-factor tilts often neglect adequate diversification. This is a serious issue because diversification has been described as the only ‘free lunch’ in finance. (...)"
    Copyright Funds-Europe.com [Full text]


  • IPE (14/06/2017)
    Smart beta products facing transparency problems, investors say
    "(...) Investors are struggling to get important information about smart beta strategies, according to a survey by EDHEC-Risk Institute. The research found there was an “important” gap between the information investors required to assess smart beta products and the ease of access to this information. The survey – of 211 European investment professionals – found that a lack of transparency was the second most important hurdle to increasing smart beta investments for respondents, after “methodological issues” with smart beta strategies. “The fact that information that is regarded as important is not considered to be easily available clearly calls into question the information provision practices of smart beta providers,” said the EDHEC-Risk Institute. “In fact, the only area in which no pronounced gap exists between the importance and the ease of accessibility scores is for performance numbers. (...)"
    Copyright IPE International Publishers Limited [Full text]


  • FT Adviser (14/06/2017)
    Smart beta transparency woes remain
    "(...) Firms operating in the rapidly growing smart beta space are still failing to provide a number of details dubbed “crucial” by investors, in a development that emphasises the growing scrutiny of such products. In its 2016 European ETF and Smart Beta Survey, the EDHEC Risk Institute highlighted a gap between how badly investors desired a piece of information and how easily available they considered this to be. Liquidity and capacity questions were judged to be the most important topic for those surveyed, with a score of 4 on a scale of 0 to 5. However, information was “relatively difficult to obtain” here, according to respondents. Other areas such as the composition of an index also appeared to cause concerns. “Even relatively basic information such as the index construction methodology is not judged to be easily available (score of 3.14) relative to its importance (score of 3.85),” said the report. (...)"
    Copyright The Financial Times Ltd [Full text]


  • ValueWalk (13/06/2017)
    Soc Gen: Active Managers Might Be Responsible For Rise of Passive AUM
    "(...) The EDHEC-Risk Institute publishes a study every year on the use of ETFs and Smart Beta strategies among investors. Now in its tenth year, the study provides a useful insight into the world of exchange traded funds and investors’ love of the instruments. ETF use has exploded during the ten years the study has been going. In 2016, 45% of the respondents declared that they had used the products to invest in equities and 10% reported that they used ETFs to invest in fixed income. At the end of 2016, these numbers had risen to 91% and 65% respectively. About two-thirds of respondents (67%) used ETFs to invest in smart beta in 2016, a considerable increase compared to 49% in 2014. (...)"
    Copyright ValueWalk [Full text]


  • ETF Strategy (08/06/2017)
    Amundi/EDHEC study reveals significant uptake of smart beta ETFs
    "(...) About two-thirds of ETF users (67%) are using the vehicles to gain exposure to smart beta strategies, a considerable increase compared to 49% in 2014, according to the latest results of the 10th EDHEC European ETF and Smart Beta Survey. The survey studies the investing habits of 211 European ETF and smart beta investors, conducted as part of the Amundi research chair at EDHEC-Risk Institute on “ETF, Indexing and Smart Beta Investment Strategies”. EDHEC-Risk Institute has conducted a regular ETF survey since 2006, providing a detailed account of European investor perceptions and practices in the domain of ETFs and smart beta strategies over the past decade. (...)"
    Copyright ETF Strategy Ltd [Full text]


  • AllAboutAlpha (04/06/2017)
    Survey in Europe: On ETF Managers and Investors
    "(...) This, as it happens, was the subject of an important EDHEC document from last August, one dealing with a particular piece of the ETF market, the smart beta indexed ETFs. Is management giving investors what they want and need in that space? The document is based upon EDHEC’s 9th annual survey of European investment professionals on the question of how they perceive the role of exchange traded funds in their portfolio management. It was the third year in a row that EDHEC had dedicated a portion of the survey to the use of products that track smart beta indexes. These “smart beta” index ETFs have seen “tremendous growth recently, in terms of both assets under management and new products, as illustrated by global figures provided by ETFGI,” a consultancy headquartered in London. One problem, though, that may slow growth going forward is that there is a gap between information about these products that is “deemed to be important” by actual or potential investors, and information that is readily available. (...)"
    Full text]


  • Benefits and Pensions Monitor (02/06/2017)
    Financial Engineering Addresses Scalability
    "(...) Financial engineering can be used to address the “tough engineering problems” posed by the scalability requirements, says the EDHEC-Risk Institute. In ‘Mass Customisation versus Mass Production in Retirement Investment Management: Addressing a Tough Engineering Problem,’ it analyzes how the retirement investing problem can be formally framed within the context of dynamic portfolio choice theory. While, it is hardly feasible to launch a customized dynamic allocation strategy for each investor and the challenge is to address the needs of a large number of investors through a limited number of funds, it suggests extending portfolio insurance and dynamic core-satellite techniques to the retirement investing context. The solutions make use of a goal-hedging portfolio, which is intended to replicate the value of a deferred annuity, and a performance-seeking portfolio, the objective of which is to efficiently harvest risk premia in order to deliver long-term performance. The allocation to these two building blocks is a function of the risk budget, defined as the difference between the current portfolio value and a suitably chosen floor. (...)"
    Copyright Benefits and Pensions Monitor [Full text]


  • Financial Standard (02/06/2017)
    Goals-based strategies valuable for retirees: Research
    "(...) Goals-based investing strategies have a greater chance of generating excess replacement income than annuities, an international study shows. Most retirement investment solutions are failing to meet the needs of future retirees, according to a study by French business school EDHEC-Risk Institute. The solutions tend to focus on achieving minimum levels of replacement income or a safety net, and separately, aim for aspirational goals by expecting higher levels of returns and performance, the report said. It looks at mass customisation versus mass production of retirement investments. It highlights the need to combine the two aspects, adding that it's possible to construct investment strategies scalable among the varying entry point levels, contributions and different aspirational goals to cater to mass retirees. It also reported mass-customised retirement solutions perform better than traditional balanced or target-date funds in reaching investors' goals and have an acceptably low opportunity cost compared to fully-customised counterparts. While it is not feasible to create a customised allocation strategy for every individual retiree, EDHEC said solutions lie in addressing the needs of a large number of investors through a limited number of funds. (...)"
    Copyright Rainmaker Group [Full text]


  • Money Management (02/06/2017)
    Goal-based investing a shoe in for good retirement planning
    "(...) Existing retirement investment solutions are not meeting the needs of future retirees and mass-customised solutions will perform better than traditional balanced or target-date funds for investors in the retirement space, according to EDHEC-Risk Institute. In a paper on investment management, EDHEC-Risk Institute analysed the “tough engineering problem” in retirement investing of designing scalable strategies customised for individuals, and forwarded the view that goal-based investing principles should be used to design solutions tailored to investor needs. EDHEC-Risk Institute director, Professor Lionel Martellini said a strong solution would combine safety and performance to meet the dual objectives of meeting investors’ essential goals as well as their aspirational goals for investing. (...)"
    Copyright Cirrus Media [Full text]


May 2017

  • AllAboutAlpha (29/05/2017)
    Broad Commodities: Value, Inflation, Implementation
    "(...) Such considerations are not novel. In 2011, Joëlle Miffre, from EDHEC’s business school in Nice, France, described the investment case for a long-short commodity portfolio in quite similar terms. “{T}he strategic decision to include commodity futures in a well-diversified portfolio does not solely depend on the risk premium of these long-short portfolios,” Miffre said. “It is also driven by a desire for risk diversification.” (...)"
    Copyright Chartered Alternative Investment Analyst (CAIA) Association [Full text]


  • Pensions Expert (26/05/2017)
    Roundtable: How has the smart beta sector evolved?
    "(...) How has the smart beta market developed? Eric Shirbini from ERI Scientific Beta, Julien Barral from bfinance, Alan Pickering from Bestrustees, James Price from Willis Towers Watson and Paul Black from Capital Cranfield discuss the range of new opportunities and how the sector has changed. (...)
    "(...) Eric Shirbini: Smart beta used to be a kind of catch-all phrase for many different strategies. One category of smart beta is where you simply aim at better diversification, so it is strategies like equal weight, risk-parity weights and so on. The other category of smart beta is what has traditionally been called factor investing, and the idea here is to capture factors that are well rewarded over the long term. That is the original concept of smart beta that we saw about 10 years ago. Since then, we have built strategies that capture both of those elements in a single strategy, both diversification and factors to provide smoother returns through time. So that has been one evolution. The second evolution has been combining factors, because factors are risky. (...) More recently we have had other things, like incorporating these strategies with environmental, social and governance criteria and low-carbon criteria. (...)"
    Roundtable: How DC schemes should approach smart beta
    "(...) How should defined contribution schemes approach smart beta, and how will environmental, social and governance focused investment change the sector? Eric Shirbini from ERI Scientific Beta, Julien Barral from bfinance, Alan Pickering from Bestrustees, James Price from Willis Towers Watson and Paul Black from Capital Cranfield discuss. (...)
    Pensions Expert: How should DC trustees go about choosing between multi-factor products and individual factors?
    Eric Shirbini: I agree on using multi-factor products. Also, to reiterate Alan’s point, if it is good for DB, why should it not be good for DC? It is for exactly the same reasons: you are trying to generate slightly higher returns, you are trying to reduce costs, you are trying to generate higher yield. The hurdle is education. It is really a question of getting to grips with what it is about. Plain vanilla products are probably more suitable, because you are not trying to mix or customise your smart beta product with specific active funds. A DB scheme may have a whole range of active funds, so it may want to find particular factors that fit in. A DC scheme will probably be looking at this to try to reduce costs and improve returns.
    (...)"
    Roundtable: Is there a risk of crowding in smart beta?
    "(...) Is there a risk of factor‑based portfolios becoming crowded, with increasing popularity potentially leading to overpricing and lower future returns? Eric Shirbini from ERI Scientific Beta, Julien Barral from bfinance, Alan Pickering from Bestrustees, James Price from Willis Towers Watson and Paul Black from Capital Cranfield debate whether crowding really is an issue within smart beta. (...)
    Eric Shirbini: I do not know what people mean by crowding with regard to smart beta. I know what it means when you talk about hedge funds, but as far as risk factors are concerned, there is no such thing as crowding. The biggest risk factor of all that you have is the equity market risk factor, the FTSE 100 itself. Can you turn around and tell me when the FTSE 100 is crowded? It is impossible to know when risk factors are crowded, or when they are going to go up or down. All you have to do is look at the low volatility factor very recently. People have been talking about low volatility being crowded for the past two years and nothing ever happened.
    (...)"
    Roundtable: What drives the appetite for smart beta among UK pension schemes?
    "(...) What is drawing pension schemes to smart beta? Eric Shirbini from ERI Scientific Beta, Julien Barral from bfinance, Alan Pickering from Bestrustees, James Price from Willis Towers Watson and Paul Black from Capital Cranfield discuss transparency and trustee training. (...)
    Eric Shirbini: In terms of the main drivers, people are looking for more total returns. But the other point we have not discussed is that what you get with smart beta is an index strategy that is transparent. Yes, you have to do a lot of homework. All the work is up front, understanding how they are constructed. Once you have got to grips with them you are able to see what you are holding. With active managers, you do not know what you are necessarily holding – so I think transparency is important. The benefit of being transparent does not mean you just know the securities you are holding, but you also understand how the strategy is constructed, which means people can challenge your approach, which will ultimately lead to improvements. Furthermore, transparency leads to lower costs.
    (...)"
    Copyright The Financial Times Limited


  • Hedgeweek (17/05/2017)
    Asset Management is going through an industrial revolution
    "(...) There is currently an industrial revolution taking place in the asset management industry, driven by the dual forces of mass production and mass customisation. Rather than merely create ‘one size fits all’ products, investment managers are increasingly required to develop investment solutions. To navigate these changing waters, EDHEC-Risk Institute has teamed up with Yale School of Management to produce a 3-seminar academic programme in advanced investment management techniques. The seminar series is specifically aimed at asset managers who wish to learn how to produce smarter building blocks and deliver mass customised solutions to their investors. And for asset allocators, who wish to understand how and when to use smarter, risk-efficient building blocks in their portfolios. The programme will help them to ask the right questions, and know what to look for, when working towards their investment goals. (...)"
    Copyright GFM Ltd [Full text]


  • ETF Strategy (11/05/2017)
    Desjardins launches international multifactor controlled volatility ETF
    "(...) Desjardins Global Asset Management (DGAM) has launched the Desjardins Developed ex-USA ex-Canada Multifactor-Controlled Volatility ETF (DFD) on the Toronto Stock Exchange, providing access to a portfolio of global stocks excluding Canada and the US which have been weighted to amplify exposure to a selection of equity market risk factors – value, momentum, size and low volatility. The fund tracks the performance of the Scientific Beta Developed ex-USA ex-Canada Multifactor-Controlled Volatility Index, developed by Scientific Beta, a commercial venture of EDHEC Risk Institute. (...)"
    Copyright ETF Strategy Ltd [Full text]


  • Structured Retail Products (10/05/2017)
    ETP News: Desjardins deploys multifactor vol control Scientific Beta indexes
    "(...) Desjardins Global Asset Management has launched a new exchange traded funds (ETF) to complement the multifactor-controlled volatility category. The Desjardins Developed ex-USA ex-Canada Multifactor-Controlled Volatility ETF has closed the initial offering of units, and is now trading on the Toronto Stock Exchange (TSX). Desjardins Developed ex-USA ex-Canada Multifactor-Controlled Volatility ETF seeks to replicate, before fees and expenses, the performance of the Scientific Beta Developed ex-USA ex-Canada Multifactor-Controlled Volatility Index, a developed markets (ex-USA ex-Canada) multifactor-controlled volatility equity index. (...)"
    Copyright Structured Retail Products [Full text - Registration required]


  • Risk.net (09/05/2017)
    Netting no problem for blockchain, tech firms tell regulators
    "(...) If complex markets such as non-cleared derivatives were to adopt DLT, in practice it is likely netting would still be carried out end-of-day, thinks Dominic O'Kane, an affiliated professor of finance at EDHEC Business School, specialising in derivatives pricing and risk management. “If collateral posting for variation and initial margin is daily, then the net bilateral exposures need only be calculated once each day, usually at close of business. If the question is about trade compression, then that can be done multilaterally at fixed periods by some third party, and would spawn a batch of unwind transactions that would then be included in the ledger.” (...)"
    Copyright Incisive Risk Information (IP) Limited [Full text - Registration required]


  • Investment Executive (03/05/2017)
    Desjardins launches new ETF
    "(...) Lévis, Que.-based Desjardins Global Asset Management Inc. (DGAM) has expanded its ETF lineup with the introduction of a new multifactor-controlled volatility ETF. Desjardins Developed ex-USA ex-Canada Multifactor-Controlled Volatility ETF, which began trading on the Toronto Stock Exchange on Wednesday, will seek to replicate the performance of a developed markets multifactor-controlled volatility equity index. The ETF, which currently aims to follow the performance of the scientific beta Canada multifactor-controlled volatility index, will invest mainly in equities beyond Canada and the U.S. "In combination with existing equities ETFs, this logical next step allows our investors to access global developed equity markets through our innovative and value-adding approach," says Nicolas Richard, CEO of DGAM, in a statement. (...)"
    Copyright Transcontinental Media Inc. [Full text]


  • Advisor.ca (03/05/2017)
    Desjardins launches multifactor-controlled volatility ETF
    "(...) Desjardins Global Asset Management Inc. has launched a new ETF in the multifactor-controlled volatility category. The Desjardins Developed ex-USA ex-Canada Multifactor-Controlled Volatility ETF has closed the initial offering of units, and those units begin trading on the Toronto Stock Exchange today. The fund seeks to replicate, to the extent reasonably possible and before fees and expenses, the performance of a developed markets (ex-U.S., ex-Canada) multifactor-controlled volatility equity index. Currently, the fund seeks to replicate the performance of the Scientific Beta Developed ex-USA ex-Canada Multifactor-Controlled Volatility Index, net of fees and expenses. Under normal market conditions, the fund primarily invests in international (ex-U.S., ex-Canada) equity securities. (...)"
    Copyright Transcontinental Media Inc. [Full text]


  • IPE Special Report on Factor Investing (May 2017)
    Top-down versus bottom-up multi-factor approaches
    Article by Noël Amenc, Frédéric Ducoulombier, Felix Goltz and Sivagaminathan Sivasubramanian
    "(...) At a glance: Academic studies have paid relatively little attention to the variability of these factor premia over time and to the short and medium-term risks of investment along factor lines. Critics of the traditional top-down approach observe that there is a downside to assembling indices that have been designed to independently target distinct factors. The most flexible way to produce portfolios that score highly across the characteristics that proxy for exposure to a set of targeted factors is to build multi-factor portfolios from the bottom-up. Modifying smart-factor index selections to take cross-factor exposures into consideration allows exposures to be improved while preserving the transparency, flexibility and efficiency of the top-down approach. (...)"
    The great factor debate
    "(...) Noël Amenc, professor of finance at the EDHEC-Risk Institute in Nice, is closer to Ang’s view. “I am more favourable towards rational explanations,” he says. “Smart beta [an alternative term for factor investing] works because you have serious sources of return, well-documented by academia. The first one is obviously the exposure to rewarded factors. These are backed by Nobel prize-winning work. Such returns from factors are not an anomaly. They are really a reward for taking long-term risks.” That does not mean that Amenc rules out behavioural explanations entirely. On the contrary, EDHEC has produced a useful summary of the main explanations, rational and behavioural for some of the best-known factors (see Economic mechanisms behind main factors). (...)"
    Getting the blend right
    "(...) Not all industry practitioners accept that bottom-up factor combination approaches are superior to those constructed from the top down. “When you select so-called factor ‘champions’ in a bottom-up approach, you create a concentrated portfolio with high turnover,” says EDHEC’s Felix Goltz. “But there’s a more conceptual problem as well. The academic studies on which factor investing relies all used a top-down approach. Fama and French looked at the value and size effects across the whole stock market, for example. “The factor relationships that were originally defined using a top-down approach may break down if we start to make too precise distinctions about factor scores at the individual stock level,” Goltz continues. “The problem about bottom-up approaches is that you may end up overexploiting the information you have in stock-level factor scores. It’s better to stick to a broad-brush approach.” (...)"
    Meeting expectations
    "(...) It is important to have realistic expectations about what factor investment can deliver. Its supporters make a strong case for its advantages but even they concede it is far from a panacea. (...) According to Professor Noël Amenc, a professor of finance at EDHEC Business School in Nice, the academic literature suggests that improved performance of 2-3% a year on average is feasible. That may not sound like a lot to some but compounded over several years it would make a considerable difference. (...)"
    Case Studies: LPP and FRR
    "(...) Rather than just using alternative indices tactically, FFR started to consider using these indices for a more strategic asset allocation. Rousseau says: “We recognised that we could collect the risk premia associated with different investment factors over a full market cycle with better risk metrics.” To implement this approach, the fund allocated funds to four different indices – a low-volatility index, an EDHEC risk-efficient index as well as a risk parity index (...). Rousseau says: “We liked the maximum diversification of the EDHEC index and the new generation of risk parity indices.” (...)"
    Copyright IPE International Publishers Limited


April 2017

  • PrincetonInfo.com (26/04/2017)
    Will an Android Replace Your Financial Advisor?
    "(...) Lionel Martellini, professor and director of the EDHEC Business School’s Risk Institute, has also studied robo-advisors, and also likes to draw medical analogies. Martellini compares the financial market to a pharmacy stocked with medicines, and a financial advisor as an expert doctor who knows a patient’s needs and can advise them on which medicine to take, and how much. Currently, online trading companies like E-Trade are like pharmacies, with different investments being equivalent to drugs. To Martellini, robo-advisors won’t be much good if they are ultimately just mechanisms to buy into funds or buy particular financial product — they would just be “pharmacies.” A good robo-advisor would be like a doctor, who could create a strategy and then explain it to the client. Will human wealth managers be put out of business by computers? Martelllini doesn’t think that will happen any time soon. So far there is only about $200 billion under management by robo-advisors, he says, although some estimates say the figure will rise to $1 trillion by 2020. (The size of the entire global financial market is estimated at $156 trillion.) (...)"
    Copyright PrincetonInfo.com [Full text]


  • Top 1000 Funds (24/04/2017)
    A Strict Régime
    "(...) Stringent regulatory constraints dictate investment strategy at French public service pension scheme Régime de Retraite additionnelle de la Fonction publique, a €26.2 billion ($28.0 billion) mandatory fund for French civil servants and members of the judiciary, established in 2005. (...) Socially responsible investing (SRI) integration is also a deciding factor in manager selection. An SRI charter “persistently and permanently” takes account of the pursuit of the public interest and applies to all “financial management transactions”, whether ERAFP performs them directly or agents perform them on its behalf. Just under 20 per cent of the equity portfolio tracks a replicated low-carbon index based on the Scientific Beta Efficient Maximum Sharpe Ratio method. “The aim of the index is to maximise the Sharpe ratio of a Euro SRI carbon-efficient universe,” Vialonga says. (...)"
    Copyright Conexus Financial Pty Ltd. [Full text]


  • Benefits and Pensions Monitor (07/04/2017)
    Bottom-up Approach Has Inefficiency Risk
    "(...) The risks and shortcomings of the bottom-up approach are shown to be inefficiency, instability and the inability to control factor exposure and non-factor risks, says the ERI Scientific Beta paper, ‘Accounting for Cross-Factor Interactions in Multifactor Portfolios without Sacrificing Diversification and Risk Control.’ It compares different approaches for constructing multi-factor equity portfolios: bottom-up score-weighting approaches that target high factor intensity and top-down approaches that also consider diversification objectives. 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 in factor exposure and high turnover. The report introduces a new approach that 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 says. (...)"
    Copyright Benefits and Pensions Monitor [Full text]


  • ETF Strategy (04/04/2017)
    Desjardins launches initial suite of seven ETFs
    "(...) The Desjardins Canada Multifactor-Controlled Volatility ETF (DFC) tracks the Scientific Beta Canada Multifactor-Controlled Volatility Index, representing the performance of Canadian equity securities which have been weighted to amplify exposure to a selection of equity market risk factors – value, momentum, size and low volatility. The fund has management fees of 0.50%. The Desjardins USA Multifactor-Controlled Volatility ETF (DFU) tracks the Scientific Beta USA Multifactor-Controlled Volatility Index, representing the performance of US equity securities which have employed a similar weighting methodology to DFC’s underlying index. The fund has management fees of 0.50%. Two more Desjardins multifactor ETFs, the Desjardins Developed ex-USA ex-Canada Multifactor-Controlled Volatility ETF and Desjardins Emerging Markets Multifactor-Controlled Volatility ETF, are also anticipated to commence trading by the end of Q2 2017. (...)"
    Copyright ETF Strategy Ltd [Full text]


  • ETF Express (04/04/2017)
    Desjardins launches suite of seven ETFs
    "(...) Desjardins Global Asset Management (DGAM) has launched a suite of seven exchange traded funds (ETFs), all of which are now trading on the Toronto Stock Exchange (TSX). (...) The Desjardins Canada Multifactor-Controlled Volatility ETF (DFC) seeks to replicate, before fees and expenses, the performance of a Canadian multifactor-controlled volatility equity index. Currently, the fund seeks to replicate the performance of the Scientific Beta Canada Multifactor-Controlled Volatility Index, net of fees and expenses. Under normal market conditions, the fund will primarily invest in Canadian equity securities. The Desjardins USA Multifactor-Controlled Volatility ETF (Ticker TSX: DFU) seeks to replicate, before fees and expenses, the performance of a US multifactor-controlled volatility equity index. Currently, the fund seeks to replicate the performance of the Scientific Beta USA Multifactor-Controlled Volatility Index, net of fees and expenses. Under normal market conditions, the fund will primarily invest in US equity securities. (...)"
    GFM Ltd [Full text]


  • Morningstar Canada (03/04/2017)
    Desjardins ETFs draw on overseas indexing expertise
    "(...) The investment arm of Quebec's giant Desjardins Group has reached out overseas for the indexing expertise that will power its new family of exchange-traded funds. Seven Desjardins ETFs opened for trading today on the Toronto Stock Exchange, and another two have received final prospectus approval. The equity ETFs launched today are broadly diversified Canadian equity and U.S. equity mandates. International equity and emerging-markets equity ETFs will follow. All of them are based on the Scientific Beta Multifactor-Controlled Volatility series of indexes maintained by the EDHEC-Risk Institute, which has offices in Singapore, London, and Nice and Paris in France. (...)"
    Morningstar Research Inc. [Full text]


March 2017

  • Investment Europe (29/03/2017)
    Evli registers pair of funds in France
    "(...) The Evli Equity Factor Europe invests in stocks of major European companies. The fund tracks ERI Scientific Beta’s factor index, which focuses on four academically determined factors: value, low risk, momentum and quality. The fund, launched on 14 October 2015, is co-managed by Mattias Lagerspetz, Peter Lindahl and Antti Sivonen. The Evli Equity Factor Europe had assets under management of €136.95m as of 28 February 2017 and delivered annual returns of 5.11% since inception. Evli has currently over €10bn in assets under management. (...)"
    Open Door Media Publishing Ltd [Full text]


  • Institutional Investor (21/03/2017)
    Danger Rising for Low-Vol, Investors Warn
    "(...) Beware low-volatility stock allocation or face potentially significant underperformance in the years ahead, experts have warned. The warning comes amid increasing concerns that traditional defensive equity strategies – which surged in popularity after the financial crisis – are vulnerable to underappreciated risks from monetary policy, interest rates, factor tilts, and geopolitics. Speaking at the EDHEC Risk Institute's Smart Beta Day in London, Dr. Eric Shirbini, a director at ERI Scientific Beta, warned that use of traditional defensive portfolio modelling could risk sub-standard returns. Shirbini argued that traditional defensive strategies are heavily biased to the low-volatility factor by their very construction, and therefore miss out on rewards from other factor tilts when market sentiment shifts. "Investing in low-volatility stocks is great when there is a downturn in the market as you tend to outperform, but when the market goes up, these low volatility strategies tend to lag behind," he said. "Low risk, low-volatility strategies tend to be much more sensitive to changes in interest rates... you end up taking a lot of country risk, which is not well-rewarded – and these strategies can be very concentrated in certain sectors as well." Shirbini's warning follows recent cautionary notes from asset managers that sophisticated investors need to look again at how they calculate risk. (...)"
    Copyright Institutional Investor LLC [Full text]


  • IPE (20/03/2017)
    Study sheds light on smart beta transaction costs
    "(...) 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 relies on simulated gross returns, the research said. “A reasonable expectation from an investor’s perspective is that providers should disclose the level of transaction costs generated by their strategies so as to allow for information on net returns,” the paper said. The paper – ”Smart Beta Replication Costs” – was written by EDHEC researchers Mikheil Esakiais, Felix Goltz, Sivagaminathan Sivasubramanian, and Jakub Ulahelis. EDHEC said its research provided an “explicit estimate” of costs applied to a range of strategies and showed the impact of using different implementation rules or stock universes. Among the major findings highlighted by the authors, the paper found that conclusions about transaction cost levels and strategy implementation challenges were heavily dependent on the stock universe under consideration. The researchers also found that, for commonly used beta indices built on liquid universes and integrated implementation rules, the impact of transaction costs on returns was small. These costs did not cancel out the relative return benefits over cap-weighted indices. (...)"
    Copyright IPE International Publishers Limited [Full text]


  • Money Management (16/03/2017)
    Investors expect disclosure of transaction costs
    "(...) Investors expect that the providers of exchange traded funds (ETFs), indexing and smart beta investment strategies should better disclose the estimated level of transaction costs generated by their strategies, according to a study conducted as part of the Amundi research chair at EDHEC-Risk Institute. The “Smart Beta Replication Costs”, which analysed the impact of transaction costs on the performance of systematic equity strategies, found that providers often failed to make reference to transaction costs and only reported gross returns, forcing investors to figure out the exact amount of such costs. (...)"
    Copyright Cirrus Media [Full text]


  • The Hedge Fund Journal (16/03/2017)
    EDHEC-Risk Publishes New Paper
    "(...) A new EDHEC-Risk Institute publication entitled “Smart Beta Replication Costs,” conducted as part of the Amundi research chair at EDHEC-Risk Institute on “ETF, Indexing and Smart Beta Investment Strategies”, provides an explicit estimate of the costs applied to a range of Smart Beta strategies and analyses the impact of different implementation rules or stock universes. A reasonable expectation from an investor’s perspective is that providers should disclose the estimated level of transaction costs generated by their strategies so as to allow for information on net returns. However, providers often fail to make explicit reference to transaction costs and simply report gross returns, leaving it to other market participants to figure out the exact amount of transaction costs. (...)"
    Copyright The Hedge Fund Journal [Full text]


  • TheStreet (13/03/2017)
    Smart Beta ETFs Surpass $500 Billion in Assets, And Financial Advisors Better Understand Why
    "(...) Many financial advisors see such indexes as a good way to provide investment exposure to myriad investment categories, while offering portfolio transparency, and a way to leverage volatility and imbalances in the financial market, while providing a clear path portfolio diversification. So far, investors like what they see from smart beta funds. A 2016 European study from the EDHEC-Risk Institute shows 86% of investors are satisfied with smart beta indexes, which bypass stock or sector concentration. That sentiment has helped push smart beta ETFs passed $500 billion in assets, as of January, 2017. (...)"
    Copyright TheStreet, Inc. [Full text]


  • Investor's Business Daily (10/03/2017)
    3 Best Single-Country ETFs For Investing In Foreign Markets
    "(...) Accuvest, based in California, has $375 million in assets under management. Exchange traded funds are key to its investment team's efforts in "building equity portfolios from the top down and focusing on country selection, rather than stock selection." In an interview with IBD, Garff discussed his best ideas for investing with ETFs in international markets as the cycle of U.S. outperformance gets ever-longer in the tooth. (...) Global X Scientific Beta Japan (SCIJ) builds its holdings based on a multifactor approach, with contributions from the value, size, momentum and low volatility factors. The result is a portfolio that is highly diversified, but takes noncapitalization-weighted positions in an attempt to outperform the cap-weighted index. Relative to the rest of the world, Japan looks interesting due to a combination of high expected earnings growth, lower risk, strong relative strength and average valuations. (...)"
    Copyright Investor's Business Daily, Inc. [Full text]


  • Asia Asset Management (March 2017)
    Bottom-up vs. top-down approaches: Improving multi-factor equity exposure
    Article by Felix Goltz, head of applied research, EDHEC-Risk Institute, research director, ERI Scientific Beta
    "(...) With increasing investor interest in multi-factor solutions, product providers have been debating the respective merits of the “top-down” and “bottom-up” approaches to multi-factor portfolio construction. Top-down approaches assemble multi-factor portfolios by combining distinct sleeves for each factor, while the bottom-up methods build multi-factor portfolios in a single pass by choosing and/or weighting securities by a composite measure of multi-factor exposures. In this article, we discuss the results of recent research assessing the merits of both the approaches. (...)"
    Copyright Asia-Pacific Media Limited [Full text - Registration required]


  • Option Finance (06/03/2017)
    La gestion factorielle gagne du terrain
    "(...) Pour y parvenir, les acteurs de la gestion factorielle ont adopté des méthodologies différentes en s’appuyant sur leur propre recherche interne ou encore sur des partenariats avec des acteurs académiques (c’est le cas d’Amundi ETF avec l’EDHEC Risk Institute) (...) « Nous avons sélectionné avec l’EDHEC cinq systèmes de pondération », affirme par exemple Nicolas Fragneau. (...)"
    Option Finance [Full text]


February 2017

  • Structured Retail Products (28/02/2017)
    Index roundup: ERI releases new risk control and smart beta indices
    "(...) ERI Scientific Beta has launched a new series of multi-smart-factor indices based on research conducted by its research teams reconciling a top-down approach with the search for strong factor intensity. The aim of this Multi-Beta Diversified High Factor Exposure offering is to conserve the advantages of explicit risk control and the diversification of specific risks, while allowing the interactions between factor indices, which can be negative, to be taken into account. (...)"
    Copyright Structured Retail Products [Full text - Registration required]


  • ETF Strategy (28/02/2017)
    ERI Scientific Beta launches new series of multifactor smart beta indices
    "(...) ERI Scientific Beta has announced the launch of a series of new multifactor smart beta indices. The Multi-Beta Diversified High Factor Exposure series uses a top-down approach to maximise explicit risk control and diversification while taking interactions between factors into account. The methodology uses a High-Factor-Exposure filter which eliminates stocks that have exposures to factors other than the desired factor. The indices may serve as the underlying for future investment products such as ETFs. (...)"
    Copyright ETF Strategy Ltd [Full text]


  • Institutional Asset Manager (21/02/2017)
    ERI Scientific Beta makes carbon reporting available free of charge for all indices
    "(...) ERI Scientific Beta has added Carbon Footprint and Carbon Intensity to all indices built on the Developed and Extended Developed Europe universes and both are now available to platform users free of charge. Noël Amenc (pictured), CEO of ERI Scientific Beta, says: "This initiative is part of our contribution towards the fight against the effects of human activities on climate change. When we signed the United Nations-supported Principles for Responsible Investment (PRI) on 27 September, 2016, we clearly expressed our desire to be one of the leaders in introducing environmental constraints into the investment industry. (...)"
    Copyright GFM Ltd. [Full text]


  • Exchangetradedfunds.com (17/02/2017)
    Live is Better
    "(...) Since 2013, with the Smart Beta 2.0 framework, EDHEC-Risk Institute has created Scientific Beta multi-smart-factor indices that are well diversified and exposed to rewarded factors. At that time, the four rewarded factors validated by EDHEC-Risk Institute were Value, Size, Low Volatility and Momentum. Furthermore, as a default weighting scheme option, Scientific Beta proposed its flagship multi-strategy weighting scheme which mixes different methods of alternative weightings to cap-weighted (Efficient Minimum Volatility, Efficient Maximum Sharpe Ratio, Maximum Deconcentration, Maximum Decorrelation and Diversified Risk Weighted) in order to diversify and thus reduce the model risks associated with each of these weighting schemes. (...)"
    Copyright Exchangetradedfunds.com [Full text]


  • ETF.com (16/02/2017)
    Finalists Announced For 2016 ETF.com Europe Awards
    "(...) ETF.com today announced the nominated finalists for the 2016 ETF.com Europe Awards, developed in partnership with Inside ETFs. The ETF.com Europe Awards are designed to recognise the people, products and firms that are driving the ETF industry forward and creating better outcomes for investors. (...)
    Index of the Year – 2016
    - Scientific Beta Developed Multi-Beta Multi-Strategy ERC Index
    This index blends four main risk factors (value, size, low volatility and momentum) with five popular smart beta diversification strategies, and has demonstrated better performance in different market phases compared with its parent index (the MSCI World index) in the long term.
    Index Provider of the Year – 2016
    - ERI Scientific Beta
    ERI continues to push the envelope of bringing cutting-edge academic research into the real world. The firm won plaudits for a unique approach to index pricing: It said investors who license its indexes can request the right to pay only when those indexes outperform the benchmark.
    Best Index Provider Website in Europe – 2016
    Awarded to the most informative and user friendly website by an index provider.
    - ERI Scientific Beta
    ERI goes beyond providing information on its own indexes: Registered users can actually use EDHEC’s systems to create new smart beta indexes of their own, right on the website. (...)"

    Copyright ETF.com [Full text]


  • ETF insight (15/02/2017)
    Arrivée Desjardins – Facteurs multiples et FNB obligataires + Privilegiées = ?
    "(...) Desjardins Wealth Management recently filed for their launch of a total of 9 ETFs, covering multi-factors strategies, as well as fixed income and preferred shares. (...) Interesting is though, that the partner in terms of the index construction process, is EDHEC – which, if memory serves, was the one firm a while back to state that if their smart beta strategy failed to add value, then they wouldn’t charge fees … => Click HERE for more info on “Scientific Beta”. All-in, if factors are good (and they can be), then the multi-factor flavor revolves around electing the “all-season” version, meaning blending factors such that one isn’t left in the cold in the one factor that happens to be out of favor for … (years?) – so let’s say Multi-Factors are a good thing and certainly worth considering versus the consistently underperforming active management space … (...)"
    Copyright ETF insight [Full text]


  • Asia Asset Management (February 2017)
    The next big growth opportunity
    "(...) According to a 2016 EDHEC survey on ETF institutional investors, 86% of respondents expressed satisfaction towards smart-beta ETFs and consider them useful tools in improving their investment process. In Europe, investors have employed smart-beta solutions as defensive strategies in light of the ongoing market turmoil as they allow investors to improve the risk/return profile of their portfolio. (...)"
    Copyright Asia-Pacific Media Limited [Full text - Registration required]


January 2017

  • Risk.net (25/01/2017)
    ‘Great rotation’ highlights clash over unseen risks in factor investing
    "(...) Gaps in performance of apparently similar products rekindle debate on index construction. (...) "What index providers are offering billed as factor investing based on academic consensus is no such thing," says Felix Goltz, head of applied research at EDHEC-Risk Institute in Nice. "The academic consensus exists around half a dozen factors, providing a sort of open-source due diligence for investors," he says. "But index providers have tweaked their definitions of factors to try to make them ‘better’. The problem is, these ‘better’ examples haven't faced the same levels of scrutiny." (...) Unlike for active managers, backtests are widely published and used by investors to inform decision-making about passive products, points out Felix Goltz at EDHEC Risk Institute. Goltz calls for providers to document how they ensure backtesting is reliable. "They should explain how factor definitions came about," he says. "Did they pick 50 versions and take the one that looked best? Even large institutional investors don't have the resources to redesign these indexes from scratch and check what the sensitivity is of performance to specific choices." (...)"
    Copyright Incisive Risk Information (IP) Limited [Full text - Registration required]


  • Benefits and Pensions Monitor (23/01/2017)
    Smart Beta Assets Growing
    "(...) Assets tracking the EDHEC Risk Institute’s smart beta indices reached US$12.3 billion as of December 31. In terms of geographical distribution, these assets come from North America (60 per cent), Europe (35 per cent), and Asia-Pacific (five per cent). Compared to December 31, 2015, this represents growth of 45 per cent. Among the drivers of this growth were the successful launch of an offering reconciling a low carbon objective and multi-smart-factor portfolio construction. Another driver of the growth in assets is their performance. The indices have a live track record that shows annualized outperformance of over two per cent compared to their cap-weighted benchmark. (...)"
    Copyright Benefits and Pensions Monitor [Full text]


  • ETF.com (17/01/2017)
    Finalists Announced For 2016 ETF.com Awards
    "(...) ETF.com and Inside ETFs are pleased to announce the finalists for the 2016 ETF.com awards. The awards are designed to recognize the people, companies and products that are driving the ETF industry forward and delivering new value to investors. (...)
    Best Index Provider Website – 2016
    Awarded to the most informative and user-friendly website by an index provider.
    ERI Scientific Beta: This indexing website powerhouse actually lets users create their own benchmarks, emphasizing the factors that matter to them. http://www.scientificbeta.com
    (...)"
    Copyright ETF.com [Full text]


  • Pensions & Investments (17/01/2017)
    CalPERS looking at expanding public asset classes as it kicks off year-long allocation review
    "(...) An invited speaker at Tuesday's retreat meeting, Lionel Martellini, professor of finance at the EDHEC Business School in Lille, France, and director of EDHEC-Risk Institute, discussed whether CalPERS could reduce portfolio risk and increase returns by offering alternative equity benchmarks beyond a cap-weighted benchmark. He said one problem with a cap-weighted benchmark is it tends to overweight large-cap, growth stocks. He said that over the long term small-cap and value stocks have outperformed large-cap and growth stocks. (...)"
    Copyright Crain Communications Inc. [Full text]


  • Financial Investigator (04/01/2017)
    ERI Scientific Beta: Scientific Beta multi-factor indices post impressive three-year live track record
    "(...) The Scientific Beta Multi-Beta Multi-Strategy Equal Weight (EW) and Equal Risk Contribution (ERC) flagship indices in all regions have posted positive live performance in comparison with their cap-weighted counterparts, with an average annualised outperformance of 2.13% over the period since the indices went live on December 20, 2013 to the end of December 2016. Over the three-year live period, the 18 indices that correspond to the initial flagship offering (i.e. the Scientific Beta Multi-Beta Multi-Strategy EW and ERC indices for nine regions: Developed, Developed ex US, Developed ex UK, Developed Europe ex UK, US, UK, Eurozone, Asia-Pacific ex Japan and Japan) all outperformed, with an average annualised excess return of 2.13%. The Developed World indices for the EW and ERC indices produced excess returns of 1.61% and 1.65% respectively. (...)"
    Copyright Financial Investigator Publishers [Full text]