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EDHEC-Risk Information

EDHEC-Risk in the Press

Articles published in 2015

[2017] [2016] 2015 [2014] [2013] [2012] [2011] [2010] [2009] [2008] [2007] [2006] [2005] [2004] [2003]


December 2015

  • Top 1000 Funds (11/12/2015)
    Optimal Factor Index Design?
    Article by Felix Goltz, ERI Scientific Beta
    "(...) EDHEC-Risk Institute suggests that investors should be wary when implementing factor tilts to ensure diversification still reigns, and that factor index design does not lead to concentration, which in turn leads to high turnover and investability hurdles. (...) Our recent research, presented in a 2015 EDHEC Risk Institute working paper, has compared the results of smart factor indices with several stylised examples of concentrated factor indices. (...) We observed, for example, that the Lyxor J.P. Morgan Europe Multi-Factor index was very strongly exposed to the risk of the Volkswagen AG stock, as was the MSCI Europe Diversified Multiple-Factor index. As such, these indices respectively contained almost 1.5 and more than 2 times more Volkswagen AG stock than the Stoxx Europe 600, and almost 10 times and 16 times more Volkswagen AG stock than the SciBeta Extended Europe Multi-Beta Multi-Strategy EW index. Since they contain a low effective number of stocks, these indices do not benefit from a deconcentration effect. (...)"
    Copyright Conexus Financial Pty Ltd. [Full text]


  • Le Monde (10/12/2015)  
    La « finance verte » est une illusion
    Par Noël Amenc (Président de ERI Scientific Beta et de EDHEC Risk Institute)
    "(…) Les recherches entreprises par l’EDHEC montrent qu’il est tout à fait possible de réduire l’empreinte carbone d’un portefeuille tout en lui assurant une meilleure rentabilité. Il faut pour cela, d’une part, exclure a priori les titres des sociétés ayant les plus fortes empreintes carbone, et, d’autre part, utiliser des techniques traditionnelles de construction de portefeuilles qui ne se préoccupent pas de la rentabilité future des titres verts, mais qui sont fondées sur la bonne exposition à des facteurs de risque. Les indices verts proposés par l’EDHEC aux investisseurs institutionnels sont plus rentables que le marché non pas parce qu’ils sont verts, mais parce qu’ils sont mieux construits que les indices traditionnels. Plutôt que de dénoncer une logique de profit à court terme qui s’opposerait à la croissance durable de long terme, la solution vise à proposer plus de rentabilité à court terme pour construire cette croissance durable. (…)"
    Copyright Le Monde [Full text]


  • L'Agefi Suisse (10/12/2015)  
    ERI Scientific Beta: Performances novembre
    "(...) L’indice de stratégie SciBeta Developed High Profitability Diversified Multi-Strategy Index a enregistré la meilleure surperformance mensuelle par rapport aux grands indices capi-pondérés. (...)"
    Copyright L'Agefi Suisse [Full text - French - Registration required]


  • Exchange-Traded Funds (09/12/2015)
    ERI Scientific Beta indices: November 2015 smart beta index performance report published
    "(...) Among the highlights of the November 2015 monthly performance report for the ERI Scientific Beta indices: This month, the best performing index in the Developed World universe among smart factor indices is the SciBeta Developed High Profitability Diversified Multi-Strategy index, with a relative return of 0.84% compared to the broad cap-weighted index, while the SciBeta Developed Low Profitability Diversified Multi-Strategy index posts the lowest relative return (-0.49%). Performance for smart factor indices exposed to risk factors known to be well rewarded over long periods remains strong, with annual performance in excess of broad cap-weighted indices ranging from 0.85% to 3.11% since inception for the Developed universe. (...)"
    Copyright exchangetradedfunds.com [Full text]


  • ThinkAdvisor (09/12/2015)
    Strengthening Portfolios With ‘Smarter’ Smart Beta
    "(...) The combination of academically supported factors and strategies with quarterly rebalancing can lead to risk-adjusted outperformance afterfees for investors. For example, one of our firm’s ETFs — the ETFS Diversified-Factor U.S. Large Cap Index Fund (SBUS) — tracks a multi-factor, multi-strategy index developed by Scientific Beta (an affiliate of the EDHEC Business School). (...) Institutional investors are also eager to take advantage of more sophisticated smart beta indexes. Multi-factor, multi-strategy indexes designed by Scientific Beta have accumulated over $8 billion in institutional assets as of the end of July. (...)"
    Copyright ThinkAdvisor [Full text]


  • Risk.net (07/12/2015)
    Overcrowding puts low volatility indexes under pressure
    "(...) Smart beta strategies have grown in importance in recent years, particularly among institutional and retail investors, with low volatility indexes attracting significant attention due to their smaller drawdowns and better performance compared with industry benchmarks. But traders warn that overcrowding into the strategies may be raising correlations and reducing index performance as a result. (...) Not everyone believes the spike in correlations among low volatility stocks implies the value of this smart beta play to investors is eroding. "Correlations are difficult to calculate over the short term. Do you really know what they are telling you or are they noise?" says Felix Goltz, head of applied research at EDHEC-Risk in Nice. (...)"
    Copyright Incisive Media Investments Limited [Full text - Registration required]


  • Financial News (07/12/2015)
    Managers hope smart beta will deliver profits
    "(...) Exchange-traded fund providers are reluctant to call it a price war, but that has not stopped ETF fees from heading lower, with some barely more than the cost of administration. While economies of scale can offset this, some fund managers are turning to smart beta products to make up the shortfall. (...) As a result, pressure is being felt not just on traditional ETFs, but also in well-established smart beta strategies. Eric Shirbini, global product specialist at ERI Scientific Beta, the indexing venture launched by Paris-based academic institution EDHEC-Risk Institute, said: “We’ve seen products launching at very low fees – at cost or perhaps even slightly below – just to attract assets.” This is generally good news for investors but there is a danger that providers develop more complex products just to maintain their margins. (...)"
    Copyright Financial News [Full text - Registration required]


  • ThinkAdvisor (04/12/2015)
    Top Portfolio Products
    "(...) 3) ERI Scientific Beta Adds Family of Indexes
    ERI Scientific Beta released a family of multi smart-factor indexes, the Quality Multi Beta Indexes. The multi-factor indexes are an equal weighted combination of the two factors attributed to quality—low investment and high profitability—and are available in both regular and highly liquid versions, and with or without sector and geographical neutrality.
    (...)"
    Copyright ThinkAdvisor [Full text]


  • Les Echos (03/12/2015)  
    L'EDHEC va lancer des indices à faible empreinte carbone
    "(...) Alors que la COP21 (21e conférence des parties sur l'environnement) bat son plein à Paris, l'EDHEC ne comptait pas rester à l'écart. L'école de commerce, très active dans la recherche dédiée aux problématiques de la gestion d'actifs, a accéléré ses travaux académiques sur la performance des indices de marché dits « low carbon ». Ce type d'indice, développé par de grands fournisseurs comme MSCI ou Euronext, référence les entreprises cotées en Bourse qui sont parmi les moins émettrices de carbone. La division Scientific Beta de l'EDHEC compte elle aussi lancer des indices « low carbon » à partir d'avril 2016 après avoir déjà mis à disposition sur sa plate-forme créée en 2012 plus de 3.000 indices et lancé commercialement 33 indices. (...) Les indices de l'EDHEC se distingueront donc des autres par une approche basée sur le « smart beta », un concept qui désigne des indices construits sur la base de facteurs particuliers comme la volatilité, l'équipondération des capitalisations boursières ou la rentabilité des entreprises. Ces indices devraient prendre en compte plusieurs facteurs afin d'encourager la diversification des portefeuilles. Pour Noël Amenc, « le point de départ de ces indices est que l'on ne peut créer de la performance que par la bonne diversification des portefeuilles ». L'objectif est de permettre 75 % d'empreinte carbone en moins par rapport aux autres indices et une performance financière 50 % supérieure. (...)"
    Copyright Les Echos [Full text - French - Registration required]


  • ETF Strategy (01/12/2015)
    Scientific Beta introduces quality-based multi-factor indices
    "(...) ERI Scientific Beta, the smart beta indexing initiative spun out of EDHEC-Risk Institute, has announced the release of a new suite of multi-factor smart beta indices based around fundamental measures of quality, namely high profitability and low investment. The combination of these factors has culminated in the firm’s Quality Multi-Beta Indices, a rules-based investable index which could form the basis of exchange-traded funds. (...) Analysis over the past 10 years (31 December 2004 to 31 December 2014) shows the benefits of combining the high profitability and low investment factors, with the index outperforming MSCI World by 3.14% on an annual basis while displaying lower volatility (15.31% vs. 17.49%) and a lower maximum drawdown (49.98% vs. 57.46%). The indices are constructed based on a variety of regions and are available in both regular and highly-liquid versions with or without sector and geographical neutrality. (...)"
    Copyright ETF Strategy Ltd [Full text]


November 2015

  • The Hedge Fund Journal (28/11/2015)
    EDHEC Critcises Opacity of Indices Regulation
    "(...) As we had feared (Index Transparency—Recent Regulatory Developments, January 2, 2014), the transparency ambitions stated in the draft Regulation and supporting study of the Commission were shattered in the course of the lawmaking process. The resulting opacity is consistent with IOSCO regulations but at odds with the high transparency standards introduced by ESMA for index-tracking UCITS. At best this will preserve regulatory arbitrage opportunities between UCITS and non-UCITS, at worst it will be the first step towards repelling the exemplary investor protections introduced by ESMA. Either way, it is a dark day for transparency. In the absence of regulatory protection, it will be incumbent on investors and fiduciaries to demand transparency from providers. (...)"
    Copyright The Hedge Fund Journal [Full text - Registration required]


  • Institutional Asset Manager (27/11/2015)
    EDHEC Risk raises concerns on regulation of financial benchmarks
    "(...) EDHEC Risk has issued a statement that it “regrets that the future text on European regulation of benchmarks organises opacity in the index provision market”. The organisation’s comments come in the light of an agreement between the European Parliament and the Council of the EU on a Regulation of financial benchmarks which was reached at the end of November. The organisation writes: “Unfortunately, this agreement does not respond to the criticism that EDHEC Risk Institute had expressed in an open letter to the chair of the European Parliament’s ECON committee Roberto Gualtieri on February 20, 2015. To the extent that the agreement is consistent with the text adopted by the European Parliament on May 19, 2015, we confirm that the proposed Regulation condones opacity in the index provision market. The mere disclosure of a concise methodology will be sufficient to meet the transparency requirements of the Regulation – neither investors nor their advisors will be in a position to perform advanced due diligence on the quality and robustness of methodologies, let alone verify that the advertised track records of indices correspond to the systematic application of their methodologies.” (...)"
    Copyright GFM Limited [Full text]


  • L'Agefi Suisse (25/11/2015)  
    EDHEC-Risk Institute: conférence smart beta
    "(...) L’EDHEC-Risk Institute (EDHEC) a divulgué hier dans un communiqué la date de la première conférence internationale dédiée aux solutions smart beta. La première édition de l’EDHEC-Risk Smart Beta Day se tiendra le 15 décembre prochain à New York. Elle sera animée par diverses tables rondes, ainsi que des ateliers détaillant les plus récents... (...)"
    Copyright L'Agefi Suisse [Full text - French - Registration required]


  • ETF Trends (17/11/2015)
    The Evolution of Smart Beta ETFs
    "(...) ETF Securities has partnered with ERI Scientific Beta on the new ETFs, including the ETFS Diversified-Factor U.S. Large Cap Index Fund (NYSEArca: SBUS) and ETFS Diversified-Factor Developed Europe Index Fund (NYSEArca: SBEU), which launched in January. Scientific Beta is an index provider specializing in smart beta solutions and is part of the EDHEC Risk Institute, an entity that works closely with institutions to implement academic research and improve their investment and risk management process has also recently came out with smart-beta ETFs of its own. The two ETFs’ selection process includes emphasizing investment factors, such as volatility, valuation, momentum and size. Additionally, the ETFS Diversified-Factor U.S. Large Cap Index Fund and ETFS Diversified-Factor Developed Europe Index use a proprietary weighting strategy to provide well diversified exposure, by combining 5 models: Maximum Deconcentration, Maximum Decorrelation, Efficient Minimum Volatility, Efficient Maximum Sharpe Ratio, and Diversified Risk Weighted. (...)"
    Copyright Global Trends Investments [Full text]


  • L'Agefi Suisse (16/11/2015)  
    ERI Scientific Beta: performances octobre
    "(...) Le mois d’octobre n’a pas épargné les stratégies indicielles smart beta, souligne l’équipe de l’ERI-Scientific Beta (de l’EDHEC-Risk Institute), dans leur rapport de performance pour le mois dernier. Cela dit, les stratégies factorielles continuent de surperformer les indices capi-pondérés... (...)"
    Copyright L'Agefi Suisse [Full text - French - Registration required]


  • Investment Week (16/11/2015)
    Smart beta strategies: What is hiding under the bonnet?
    "(...) A recent study conducted by EDHEC Risk Institute has highlighted a number of issues inherent in risk factor-based products in particular, which it said are often highly concentrated in order to achieve promised returns. These types of strategies allow investors to gain exposure to various risk factors, such as value, momentum and size, but the study revealed these indices often do so at the expense of portfolio diversification. The report, entitled The limitations of factor investing: Impact of the Volkswagen scandal on concentrated versus diversified factor indices, looked specifically at the exposure of such indices to Volkswagen, as the stock suffered significant falls in September. The research used the example of two factor-weighted indices – J.P. Morgan Europe Multi-Factor and MSCI Europe Diversified Multi Factor – and found they were both far more exposed to Volkswagen than the traditional Stoxx Europe 600. As a result, the performance of both strategies suffered more than the traditional index in the week of the emissions scandal. There is no need to despair, however, as not all factor indices suffer from the same problem. For example, in the context of the Volkswagen scandal, the report looked at the SciBeta Extended Europe Multi-Beta Multi-Strategy EW and found it to be far more diversified than the two previously mentioned. As a result, it managed to protect returns in the week of the scandal, outperforming both the aforementioned factor strategies and the Stoxx Europe 600. (...)"
    Copyright Incisive Business Media (IP) Limited [Full text]


  • Le Revenu (16/11/2015)  
    Des gérants de sicav attentifs au réchauffement climatique
    "(...) Comment l’ERAFP, un fond de retraite public, donne l’exemple pour inciter les gérants du secteur privé à sélectionner à leur tour dans leurs fonds, des sociétés qui améliorent leurs rejets de carbone. (...) Reste pour l’organisme public à convaincre les grands gérants de la sphère privée de prendre le «risque» se d’éloigner à leur tour des indices habituels. C’est l’un des freins majeurs à l’engagement contre le réchauffement, les gérants ne voulant pas avoir à expliquer d’éventuelles contreperformances. «Nous avons élaboré un indice ISR FTSE EDHEC Risk Efficient qui, sur les trois dernières années affiche un gain de 70% au lieu de 62% pour le MSCI EMU (dix pays de la zone euro) réplique Philippe Desfossés qui se réjouit qu’Euronext prépare à son tour un nouvel indice intégrant l’enjeu du réchauffement climatique. (...)"
    Copyright Le Revenu [Full text - French]


  • Les Echos (12/11/2015)  
    Brevan Howard attend de la Fed une hausse des taux libératoire
    "(...) Brevan Howard, le plus réputé des hedge funds « global macro », qui investit sur tous les grands marchés, est à la peine. Il va réduire ses effectifs globaux, actuellement de 400 personnes, de près de 10% selon « Reuters » . La chute de ses capitaux sous gestion de 35 à 25 milliards de dollars en un an, du fait de ses performances décevantes et de la fermetures de certains de ses fonds (émergents, matières premières), l’incite à réduire la voilure. En outre, il doit faire face à la concurrence de Chris Rokos , un des anciens co-fondateurs de Brevan Howard, qui a créé son propre hedge fund, entraînant des clients avec lui. Le hedge fund de Brevan Howard a une performance stable sur les 9 premiers mois de l’année alors que les fonds global macro ont gagné à peine 1,5% selon les indices EDHEC Risk alternatives. (...)"
    Copyright Les Echos [Full text - French - Registration required]


  • Structured Retail Products (11/11/2015)
    Volkswagen scandal hits smart beta benchmarks, EDHEC
    "(...) Diversification of the specific risk of factor indices over the short term can lead to much better risk-adjusted performance than the traditional approaches to constructing smart beta indices, according to the EDHEC-Risk Institute. (...)"
    Copyright Structured Retail Products, a division of Euromoney Global Limited [Full text - Registration required]


  • Le Monde (10/11/2015)  
    Ces écoles qui misent sur la distinction
    "(…) Un domaine sur lequel l’EDHEC, implantée à Lille, Nice, Paris, Londres et Singapour, a rapidement misé, grâce à son expertise en finance notamment. « Cela nous a permis de briser le plafond de verre parisien », estime son directeur général, Olivier Oger. Aujourd’hui, son campus niçois, qui abrite un centre de recherche en finance, l’EDHEC Risk Institute, s’est imposé. (...) Au début des années 2000, l’EDHEC s’est fortement positionnée dans le domaine de la finance. C’est sur son campus niçois (2 000 étudiants dont 450 étrangers) qu’elle a engagé cette stratégie payante. L’EDHEC-Risk Institute, institut de recherche sur la ­finance, a fait sa réputation. « C’est grâce à cette expertise que le gouvernement singapourien nous a choisis pour implanter un campus d’excellence et un centre de recherche en la matière à Singapour [en 2011] », explique Olivier Oger, directeur de l’EDHEC. (…)"
    Copyright Le Monde [Full text]


  • Money Management (10/11/2015)
    Performance may miss investor goals
    "(...) Advisers are being urged to adopt an investor-centric goals-based investment (GBI) approach to their advice to clients, rather than focusing on performance. Research from the EDHEC-Risk Institute found that goals-based investing increased the probability of achieving investors' important or aspirational goals, compared to traditional approaches. The research paper said traditional product-centric approaches to financial advice based on an estimated risk-aversion parameter needed to be replaced by a goal-based investor-centric approach to wealth management. (...)"
    Copyright Cirrus Media [Full text]


  • Wealth Adviser (09/11/2015)
    EDHEC-Risk researches goal-based solutions for financial advisers
    "(...) EDHEC-Risk Institute’s latest research has produced a new conceptual framework to better achieve individual investors’ goals. The Institute writes that any investment process should start with a thorough understanding of the investor problem: “Individual investors do not need investment products with alleged superior performance; they need investment solutions that can help them meet their goals subject to prevailing dollar and risk budget constraints.” In a new publication entitled ‘Introducing a Comprehensive Investment Framework for Goals-Based Wealth Management,’ the Institute develops a general operational framework that can be used by financial advisers to allow individual investors to optimally allocate to categories of risks they face across all life stages and wealth segments so as to achieve personally meaningful financial goals. (...)"
    Copyright GFM Limited [Full text]


  • Benefits and Pensions Monitor (04/11/2015)
    Concentration Of Indices Hurts Diversification
    "(...) In their concern to maximize factor exposures, multi-factor index providers have favoured concentration of the indices to the detriment of their diversification, says an EDHEC Risk Institute working paper. ‘The Limitations of Factor Investing: Impact of the Volkswagen Scandal on Concentrated versus Diversified Factor Indices’ shows even though the excessive concentration of cap-weighted indices was one of the motivations for creating smart beta indices, solely taking the factor dimension into account ultimately leads to the indices exposing investors to considerable specific risks. Ultimately, and going beyond the stocks, the excessive concentration of these indices meant that they considerably underperformed. With the Volkswagen scandal, the EDHEC Risk Institute and ERI Scientific Beta research teams stress that the robustness of multi-factor indices depends on both the balance of factor exposures and good diversification of specific risks. It is only on this double condition that an index can be qualified as smart. (...)"
    Copyright Benefits and Pensions Monitor [Full text]


  • Financial Investigator (04/11/2015)
    EDHEC Risk Institute: The limitations of factor investing: factor diversification is not enough to protect investors against market shocks
    "(...) In 2014, EDHEC Risk Institute researchers had shown in an article published in the Journal of Portfolio Management (Amenc, N., F. Goltz, A. Lodh and L. Martellini, Summer 2014, Towards Smart Equity Factor Indices: Harvesting Risk Premia without Taking Unrewarded Risks, Vol. 40, No. 4) that over the long term good diversification of the specific risk of factor indices led to much better risk-adjusted performance than the traditional approaches to constructing these indices. In a new EDHEC Risk Institute working paper entitled “The Limitations of Factor Investing: Impact of the Volkswagen Scandal on Concentrated versus Diversified Factor Indices,” Noël Amenc, Professor of Finance, EDHEC Risk Institute and CEO, ERI Scientific Beta, and his co-authors Sivagaminathan Sivasubramanian, Quantitative Analyst, ERI Scientific Beta, and Jakub Ulahel, Quantitative Research Analyst, ERI Scientific Beta, have shown that in the short term this good diversification enabled one to cope with the consequences of risks that affected a stock or a sector of activity. (...) With the Volkswagen scandal, the EDHEC Risk Institute and ERI Scientific Beta research teams wish to stress that the robustness of multi-factor indices depends on both the balance of factor exposures and good diversification of specific risks. It is only on this double condition that an index can be qualified as smart. (...)"
    Copyright Financial Investigator Publishers [Full text]


  • Fund Strategy (04/11/2015)
    Research: Diversification is key for smart beta products
    "(...) Many smart beta strategies are too concentrated to specific factor exposures, which is harming returns, a new paper has found. Research from the EDHEC Risk Institute and ERI Scientific Beta looked at the impact of the recent falls in the Volkswagen stock and how it affected portfolios. The research shows that in the short term multi-factor indices should be more diversified. However, it found that managers want to maximise factor exposures and so ran more concentrated portfolios. “Even though the excessive concentration of cap-weighted indices was one of the motivations for creating smart beta indices, solely taking the factor dimension into account ultimately leads to the indices exposing investors to considerable specific risks,” says the research. (...)"
    Copyright Centaur Communications Ltd [Full text]


October 2015

  • Les Echos (22/10/2015)  
    Les « hedge funds » ont souffert au 3e trimestre
    "(...) Les mauvaises performances sont loin d’être les pires de l’histoire du monde alternatif qui a la mémoire courte. Ainsi, les fonds « global macro », qui investissent sur tous les marchés, ont perdu 1,3 % en août alors qu’ils avaient chuté de 3,1 % en septembre 2008, selon les indices EDHEC Risk alternatifs. En deux mois (septembre et octobre 2008) les fonds spécialisés sur les marchés émergents avaient perdu plus de 23 %, et 20 % en un seul mois, en août 1998 lors de la crise russe. Ils n’ont abandonné que 6 % durant l’été dernier. Les fonds actions dits « long-short » qui achètent et vendent à découvert des actions ont perdu 2,3 % en août. Ils avaient perdu deux fois plus durant la crise russe et trois fois plus en septembre 2008. (...)"
    Copyright Les Echos [Full text - French - Registration required]


  • The Business Times (21/10/2015)
    Tharman unveils 3 initiatives to draw institutions to infrastructure
    "(...) SINGAPORE'S Deputy Prime Minister Tharman Shanmugaratnam on Tuesday launched three initiatives to make infrastructure investment a more regular feature in the asset allocation of institutional investors. (...) Secondly, Singapore wants to develop benchmarks, data and analyses of performance and risks that institutional investors need to make infrastructure investment decisions. For instance, EDHEC, a French business school with a Singapore arm, has done fundamental research on infrastructure asset pricing, and is in the process of creating usable performance benchmarks for long-term infrastructure debt and equity instruments. (...)"
    Copyright Singapore Press Holdings Ltd. [Full text]


  • The Straits Times (21/10/2015)
    Three initiatives
    "(...) Singapore is working to develop infrastructure as an attractive asset class, and "crowd in" institutional investors. There are three initiatives where Singapore is actively seeking to make a difference. (...) CREATING QUANTITATIVE MEASURES ON THE EXPECTED PERFORMANCE AND RISKS OF INFRASTRUCTURE ASSETS: Institutional investors have found it difficult to scale up their infrastructure exposure because of a lack of data that can be used to measure performance and risks of such projects. To this end, the EDHEC Business School's research arm in Singapore will build on its fundamental research on infrastructure asset pricing to create performance benchmarks for long-term infrastructure debt and equity investments. (...)"
    Copyright Singapore Press Holdings Ltd. Co. [Full text]


  • Funds Europe (October 2015)
    EDHEC RESEARCH: The challenges of factor investing
    "(…) The choice of meaningful factors and the proxies for them at the investment level are considered by the EDHEC-Risk Institute. The article also considers multi-factor investing. ‘Factor investing’ recommends that allocation decisions be expressed in terms of risk factors, as opposed to standard asset class decompositions. While intuitively appealing, this approach poses a major challenge, namely the choice of the meaningful factors and the corresponding investable proxies. In simple terms, factor investing regards each constituent in an investor’s portfolio, and therefore the whole portfolio as a bundle of factor exposures. There are as many factors as individual securities and the factors are themselves portfolios of such securities, so thinking in terms of factors is strictly equivalent to thinking in terms of asset classes, and therefore would not add any value. More relevant is the situation where a parsimonious factor model is used, with a number of factors smaller than the number of constituents. (...)"
    Copyright Funds Europe [Full text - Registration required]


  • ETF.com (12/10/2015)
    Lyxor Launches European Multi-Factor ETF
    "(...) The first multi-factor ETFs to launch in Europe were in 2014 and are based on indexes from ERI Scientific Beta, all with the same cost of 0.4 percent. They are the Morgan Stanley Scientific Beta Global Equity Factors UCITS ETF (GEF), the Morgan Stanley Scientific Beta US Equity Factors UCITS ETF (USEF) and the Amundi Global Equity Allocation Scientific Smart Multi Beta UCITS ETF (SMRT). (...)"
    Copyright ETF.com [Full text]


  • Institutional Asset Manager (12/10/2015)
    CFA and EDHEC-Risk Institute to host Advances in Asset Allocation seminars in London and New York
    "(...) Having learned through the recent crises about the limited payoffs and significant risks of excessive reliance on security asset selection models, investment managers and institutional investors are showing unprecedented interest in asset allocation approaches as sources of performance. It is against this backdrop that in 2008, CFA Institute and EDHEC-Risk Institute, the premier European institution for applied research into risk and investment management, partnered to offer advanced executive education programmes to senior investment industry professionals and introduced what remains their flagship programme – the three-day “Advances in Asset Allocation” seminar. The course presents the latest research in advances in asset allocation and examines emerging trends to clarify the sometimes fuzzy distinction between true innovation and mere marketing claims. This event is a unique opportunity to gain an in-depth appreciation of the concepts and techniques that will shape the future of investment management and to acquire practical tools and novel investment approaches to improve asset allocation and risk management processes and design new products. (...)"
    Copyright GFM Limited [Full text]


  • Financial Investigator (08/10/2015)
    EDHEC-Risk Institute study highlights the added value of active allocation to smart beta indices
    "(...) In the paper, the authors show the benefits that active managers and asset owners can expect from dynamically allocating to smart factor indices, with a focus on efficiently reacting to changes in market conditions, as well as efficiently spending relative risk budgets with respect to a cap-weighted reference portfolio. This research was supported by Rothschild & Cie as part of the research chair at EDHEC-Risk Institute on “Active Allocation to Smart Factor Indices”. This chair is examining the benefits of smart beta allocation. (...)"
    Copyright Financial Investigator Publishers [Full text]


  • Wealth Adviser (08/10/2015)
    New study highlights the added value of active allocation to smart beta indices
    "(...) The EDHEC-Risk Institute has published a new study entitled ‘Active Allocation to Smart Factor Indices’, drawn from the eponymous Rothschild & Cie research chair. The study provides a formal empirical analysis of the benefits of strategic and tactical allocation to multiple equity smart factor indices in a context where relative risk with respect to the cap-weighted indices needs to be explicitly controlled for. The institute writes: “Once regarded as exotic curiosities, smart equity factor indices have now made it into the mainstream, and have become important for investors to better understand how their outperformance relates to underlying sources of risk. The focus of this paper is to provide a quantitative assessment of the benefits expected from the three sources of added-value (which come from time-varying strategic, time-varying tactical or time-varying core-satellite allocation decisions) in the design of equity benchmarks with superior risk and return characteristics.” (...)"
    Copyright GFM Limited [Full text]


  • Infrastructure Investor (October 2015)
    The search for clarity
    "(...) Valuing privately held infrastructure equity presents numerous challenges. Frederic Blanc-Brude and Majid Hasan of the EDHEC-Risk Institute propose a way forward. (...)"
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  • Risk.net (02/10/2015)
    Index providers clash over evolution of multi-factor products
    "(...) EDHEC-Risk Institute is competing with its own range of multi-factor products under the Scientific Beta Multi-Strategy brand, one of which – the Scientific Beta Developed Multi-Beta Multi-Strategy index – was licensed for use in a range of Amundi ETFs last summer, which today have combined assets under management of $470 million. Total assets tracking EDHEC strategies across institutional and retail stand at $8 billion. (...) Providers have been experimenting with different weighting schema. EDHEC's so-called smart weighting approach offers five choices of weighting methodology – including equal weighting and an efficient volatility weighting – as well as a diversified multi-strategy approach that allocates stock weighting based on the average of these five separate methodologies. "It gives you a kind of double-diversification effect," says Goltz. "If you use any of these weighting schemes, you will have a well-diversified portfolio, but using the multi-strategy is superior because each individual scheme relies on different assumptions and none of them is perfect." (...)"
    Copyright Incisive Media Investments Limited [Full text - Registration required]


  • Top 1000 Funds (02/10/2015)
    Beyond backtests: considering the robustness of smart beta
    Article by Felix Goltz, head of applied research, EDHEC-Risk Institute, Research Director, ERI Scientific Beta
    "(...) Systematic equity investment strategies – so-called smart beta strategies – are usually marketed on the basis of outperformance. However, it is important to recognise that performance analysis is typically conducted on backtests that apply the smart beta methodology to historical stock returns. Concerning actual investment decisions, a relevant question, therefore, is how robust the outperformance is, writes Felix Goltz. In general, robustness refers to the capacity of a system to perform effectively in a constantly changing environment. For smart beta strategies, we distinguish between ‘relative robustness’ and ‘absolute robustness’. A strategy is assumed to be ‘relatively robust’ if it is able to deliver similar outperformance in similar market conditions. Single factor indices aim to achieve this kind of robustness. Absolute robustness is the absence of pronounced state and/or time dependencies and a strategy shown to outperform irrespective of prevailing market conditions. Multi-factor indices often aim to improve absolute robustness. (...)"
    Copyright Conexus Financial Pty Ltd. [Full text]


  • IPE (October 2015)
    Interview: Rolling back the barriers
    "(…) Liam Kennedy discusses the role of research in institutional investment with Noël Amenc, who stepped down as director of the EDHEC-Risk Institute earlier this year. Relatively few academic institutions specialise in investment risk management. One of them is EDHEC-Risk Institute (ERI), founded in 2001 and located in Nice, and an offshoot of the EDHEC Business School. Both theory and practice have evolved almost immeasurably in the 14 years of ERI’s existence, at the height of the equity market downturn that marked the end of the dotcom bubble. Those years have seen a confluence of events that have rather pushed investors towards better risk management and asset-liability management (ALM) techniques. Aside from the equity market downturn of 2000-03, which brought a long bull market to a close and shattered assumptions about the size of the equity-risk premium, these have included the maturing of defined benefit liabilities, which have inevitably pushed investors towards fixed-income. Another factor has been regulation, both international and domestic. ERI has sought from the outset to keep its research output focused on current issues faced by institutional investors, at the same time testing the assumptions behind regulation (actual or proposed), be they the tenets of Solvency II or the effect of a financial transaction tax. (…)"
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September 2015

  • Le Nouvel Economiste (30/09/2015)  
    Les banques de détail assiégées par les Fintech et les Gafa
    "(…) Il est pourtant un domaine où la désintermédiation des services bancaire pourrait faire exploser les positions actuelles. La gestion d’actifs pour le compte des particuliers ou des entreprises devient un métier des plus vulnérables. C’est en tout cas l’avis de Lionel Martellini, professeur de finance et directeur de l’EDHEC Risk Institute. Les réseaux d’agences distribuent des packages standards pour gérer les finances de leurs clients (actions, obligations, produits dérivés) pour un coût très élevé. Alors que la valeur ajoutée est faible compte tenu du niveau de conseil. Il faut passer du produit à la solution.” (…)"
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  • The Hedge Fund Journal (24/09/2015)
    Factor Investing: Welfare improving or marketing fad?
    Article by Lionel Martellini and Vincent Milhau
    "(...) A new approach known as factor investing has recently emerged in investment practice, which recommends that allocation decisions be expressed in terms of risk factors, as opposed to standard asset class decompositions. While intuitively appealing, this approach poses a major challenge, namely the choice of the meaningful factors and the corresponding investable proxies. Simply put, factor investing proposes to regard each constituent in an investor’s portfolio, and therefore the whole portfolio, as a bundle of factor exposures. Obviously, factor models, such as those of Sharpe (1963) and Fama and French (1993), have long been used for performance measurement purposes, and several factors correspond to classical investment styles, such as value-growth investing, trend following or short volatility, that were in use in the industry before they were formally identified as asset pricing factors. In this context, the question arises as to whether factor investing is truly a new welfare-improving investment paradigm or merely another marketing fad. (...)"
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  • Daily Alts (22/09/2015)
    Ease of Implementation Important to Smart Beta Investors
    "(...) The EDHEC-Risk Institute recently published an exhaustive study of “alternative equity beta investing” – i.e. smart beta. As a basis for the study, 128 investment professionals, intended to be representative of the industry as a whole, were asked questions regarding their views and uses of smart-beta strategies. EDHEC’s findings indicate that while investors recognize the promise of smart beta, they’re also concerned about lack of transparency and the difficulty of implementing the strategies. (...) According to EDHEC, investors are more acquainted with the principles of constructing smart-beta portfolios than they are with the strategies’ risks, and what drives their performance. This not only poses risk for the proper use of smart beta, but also calls into question the fairness of the way the strategies are marketed by fund companies. (...) Ultimately, EDHEC-Risk Institute’s findings suggest that investors expect more from smart beta strategies than merely providing “the right direction of exposure” – they expect efficient risk-adjusted returns, and they expect the strategies that generate them to be easy to implement. (...)"
    Copyright Alternative Strategy Partners, LLC [Full text]


  • Funds Europe (September 2015)
    Smart beta for all seasons
    "(…) Funds Europe talks to Fannie Wurtz, Global Head of ETF, Indexing & Smart Beta Sales at Amundi, about the prospects for growth in the Smart Beta market. (...) We observe increasing demand from the market: according to the results of the EDHEC Risk survey, 25% of the interviewed professionals have already invested in Smart Beta ETFs and a further 40% intend to do so in the near future. (...) We strongly believe that the Smart Beta market in general, and the Smart Beta ETF market too, will continue to grow further. Multi-factor Smart Beta strategies represent a very important area of growth. In 2014 we parented with EDHEC Risk Institute and Scientific Beta to create a multi-Smart Beta index. This index combines a selection of four factors, chosen for their positive expected long-term reward (low volatility, valuation, size, momentum) with five Smart Beta strategies, aiming at improving risk-adjusted performance compared to the average component index. (...)"
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  • Funds Europe (September 2015)
    Asset Allocation: Finding the right combination things
    "(…) The next stage of development in the smart beta world is underway, with investors looking to combine investment factors – such as low volatility, value, and momentum – into their portfolios. Amundi, for example, recently launched a global equity multi-smart beta ETF based on indices created by academics associated with the EDHEC-Risk Institute that track four factors: volatility, valuation, size and momentum. (...) Eric Shirbini, global product specialist at ERI Scientific Beta, the smart beta index venture of the EDHEC-Risk Institute, says investors like Amundi invest in its combined index only after all the trades have been netted out. “If one of the smart beta indices is selling the same stock as another smart beta is buying in exactly the same proportion, then there is no trade at the composite index level and therefore no trading cost for the investor.” He says that compared to a multi-beta fund that manages the individual smart beta strategies separately, netting saves an investor 5% to 7% in “one-way turnover” per year. He adds that the lower trading cost, combined with the lower risk of diversifying across smart factors indices that are not perfectly correlated to each other, are the two main reasons why investors are better off using this blended approach. (...)"
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  • Funds Europe (September 2015)
    Smart beta roundtable: More than a buzzword
    "(…) The term ‘smart beta’ is still struggling for complete acceptance. Our panel of smart beta users and providers discuss what it is and how the market in these products is developing beyond equities. (...) Laurent Trottier, Amundi: It would be wrong to talk about this as a buzzword because there is real money and real interest flying into the strategies. An EDHEC survey showed about 25% of people surveyed already invested in smart beta and about 40% said that they will. The activities of some French pension funds and the Government Pension Investment Fund in Japan with its equity smart beta investment last year show that it is more important than a buzzword. (...) Funds Europe: Last year, EDHEC-Risk Institute said that smart beta investors were taking considerable risk because index promoters were not documenting or explicitly controlling risks within their offerings. The academics called into question the robustness of the index performance. Does the panel feel these concerns still apply? Olivier Cassin, Lyxor: Transparency is key for us. We agree with EDHEC Risk and share their concerns but anything we do, whether on our proprietary strategies or when we select indices on which we launch ETFs, requires a huge amount of research and due diligence. Neil Morgan, Capita: I think one of EDHEC’s issues was transparency, and I think they would say that if it’s not transparent and rules-based and can’t be replicated, then it probably isn’t smart beta. (...)"
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  • Funds Europe (September 2015)
    Performance: A balancing act
    "(…) Eric Shirbini, global product specialist at ERI Scientific Beta, the EDHEC-Risk Institute initiative that focuses on smart beta design and implementation, draws attention to the group’s recent work in which the quality factor is redefined. In the past six months, ERI Scientific Beta has introduced two indices focused on high profitability and low investment, which Shirbini says are “a much more effective way of investing in quality”. He expects these factors to gain further popularity with investors in the coming months and notes that, year–to-date, the high profitability factor (companies with strong profit margins) has outperformed the market-cap weighted index by 2.09%. In comparison, the low investment factor – companies that tend not to reinvest a lot of their earnings – has been flat compared to market cap-weighted indices. Generally, Shirbini says, low investment companies are conservative with a very high cost of capital and they can provide a higher return over the long term. In line with the market’s growing sophistication, another focus at ERI Scientific Beta is the rise of multi-beta and, most recently, multi-strategy products. (...)"
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  • The Asset (September 2015)
    Smart, smarter, smartest
    "(...) “Smart beta promises the best of the two worlds,” says Frédéric Ducoulombier, founding director, EDHEC Risk Institute, Asia. “From passive management it takes the idea of systematic strategies, relative transparency, low fees, low cost, and from active management – the promise of higher performance per unit of risk than in cap-weighted indices.” (...) Factor investing requires knowledge and sophistication. “Each of these factors has different behaviour in bull and bear markets, high- or low-volatility markets, recession or expansion,” says Ducoulombier. “Investors have to understand what the performance of these products will be in these markets,” he adds. (...) “The darling of this year is multi-factor investing,” says Ducoulombier. EDHEC-Risk Institute has designed an approach that combines four factors: value, size, low volatility and momentum. The combined index allocates weighting to the four sub-indices that are periodically rebalanced, to maintain the desired exposure and reduce the variability of performance in changing market conditions. (...)"
    Copyright Asset Publishing and Research Limited [Full text - Registration required]


  • Financial News (21/09/2015)
    Investors slow to adopt Libor alternatives
    "(...) Given this financial exposure, the reluctance of institutional investors to switch away from Libor at first seems odd. But finding a natural alternative which is both more robust and a ready substitute is not proving an easy task. Craig Gillespie, an investment consultant at Aon Hewitt, said: “Sonia (the Sterling Over Night Index Average) is becoming more common as a benchmark interest rate for swaps. It is happening slowly.” Sonia is an index based on real transactions brokered by members of the Wholesale Markets Brokers’ Association. However, the Sonia market remains small, said Gillespie, which means it is not immune to manipulation either. Because it is an overnight rate, it is also difficult for it to entirely replace Libor, which is calculated for a range of maturities from one day to 12 months. Other indices present similar problems, according to Arjuna Sittampalam, research associate with the EDHEC-Risk Institute. “In any alternative we can pick holes as well,” he said. (...)"
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  • Global Risk Regulator (September 2015)
    Infrastructure revisions touch wider Solvency II debate
    "(...) In fact, EIOPA’s proposals on infrastructure equity assets appear potentially generous in terms of relaxing capital requirements quite substantially, specifically for state-backed private finance initiative (PFI) deals. At present, infrastructure equity has the same calibration as other forms of equity, with risk calibrations at 39% for listed developed market equities and 49% for unlisted and emerging market equity assets. Most infrastructure equity deals are unlisted. EIOPA drew on research into UK PFI companies carried out by Frédéric Blanc-Brude, an academic at the EDHEC Risk Institute in Singapore. “The analysis for PFI portfolios shows that the worst drawdowns are still significantly lower than for the benchmark {UK} FTSE all-shares {index}. (...)"
    Copyright The Financial Times Limited [Full text - Registration required]


  • Money Management (11/09/2015)
    Factor investing criteria needs examination
    "(...) Investors have been warned to examine the criteria used by fund managers involved with factor investing, stating that some of the strategies only work well in the short-term or have only shown good results in back-testing and not actual current market conditions. Smart beta researcher and strategy provider, ERI Scientific Beta, stated while academic research has been conducted on the application of factors to index investing, a number of providers were creating their own factors and applying them inconsistently to funds and in contrast to generally accepted principles. In a paper titled ‘Pimp My Factor? A Critical Comparison of Factor Definitions', ERI Scientific Beta, stated that some factor investing managers were "not only inconsistent with factor definitions in the academic literature, but are also inconsistent concerning the factor definitions across their own indices". (...)"
    Copyright Cirrus Media [Full text]


  • ETF.com (09/09/2015)
    The End Of Smart Beta As We Know It
    "(...) But could combining factors be the next big push? Marketing and sales teams will be eager to reassure investors that by packaging up several factors into one index, their ETF is more likely to perform well throughout all market cycles. The monthly reports on smart beta performance from ERI Scientific Beta show that diversified factor indexes have generated higher returns than their market cap counterparts every month this year, and year-to-date as a whole. In August, the best performing index in their range was the SciBeta Developed Mid Cap Diversified Multi-Strategy index, with a relative return of 1.86 percent compared to the broad cap-weighted index. We have already seen this trend take hold with multi-factor ETFs launched by Amundi and Morgan Stanley in partnership with EDHEC’s Scientific Beta. The Amundi Global Equity Allocation Scientific Smart Multi Beta A-EUR UCITS ETF (SMRT) has grown to a very healthy €423 million, and has year-to-date returns of 6.65 percent in euro terms. The Morgan Stanley Scientific Beta Global Equity Factors UCITS ETF (GEF) has fallen over 1 percent YTD in USD terms but has still grown to $116 million. Not too shabby, compared to Market Vector’s combined $18 million AUM. (...)"
    Copyright ETF.com [Full text]


  • Financial Investigator (08/09/2015)
    Monthly ERI Scientific Beta smart beta index performance report
    "(...) Scientific Beta, an EDHEC-Risk Institute Venture, has published the August 2015 Smart Beta Performance Report. Among the highlights of this month's report: This month, the best performing index in the Developed World universe among smart factor indices is the SciBeta Developed Mid Cap Diversified Multi-Strategy index, with a relative return of 1.86% compared to the broad cap-weighted index, while the SciBeta Developed Large Cap Diversified Multi-Strategy index posts the lowest relative return (0.40%). All sixteen smart factor indices post positive relative returns compared to the broad-cap weighted index this month. Year-to-date, the best-performing smart factor index in the Developed World universe is the SciBeta Developed Low Dividend Yield Diversified Multi-Strategy index, with a return of 4.45%, while the worst-performing index is the SciBeta Developed High Dividend Yield Diversified Multi-Strategy (-0.84%). Performance for smart factor indices exposed to risk factors known to be well rewarded over long periods remains strong, with annual performance in excess of broad cap-weighted indices ranging from 0.96% to 3.15% since inception for the Developed universe. (...)"
    Copyright Financial Investigator Publishers [Full text]


  • Asia Asset Management (September 2015)
    Proof is in the pudding
    Article by Felix Goltz, Veronique Le Sourd and Ashish Lodh
    "(…) Alternative equity beta investing has recently received increasing attention in the industry. Although products in this segment currently represent only a fraction in assets, there has been tremendous growth recently both in terms of assets under management, and – perhaps more strikingly – in terms of new product development. The objective of research that we conducted recently with the support of Société Générale Prime Services was to provide insights into the conceptual background and the current industry practices of alternative equity beta investing. (…)"
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  • ETF Strategy (04/09/2015)
    Multi-factor smart beta ETFs perform well amid volatile conditions
    "(...) For many, the investment holy grail is a strategy that will outperform across all stages of the market cycle. Multi-factor smart beta strategies are one of the more recent attempts to achieve this. The heightened volatility witnessed so far in 2015 has provided an excellent backdrop against which to judge their performance. (...) The outperformance of Scientific Beta Multi-Beta Multi-Strategy Indices, produced by EDHEC-Risk Institute’s smart beta arm, Scientific Beta, offers evidence in support of multi-factor strategies. Their range of indices have posted positive relative year-to-date performance in comparison to their cap-weighted counterparts, with an average outperformance of 3.1%. During the month of August alone, these same indices all made positive returns, with an average outperformance of 1.6%. According to Scientific Beta, multi-factor offerings aim to provide robust performance in relation to cap-weighted indices in all market conditions. This robustness is due to the balance of factor exposures and a good diversification of weighting schemes. This enables each of the multi-factor indices to benefit over the long-term from exposure to the rewarded risk factors that they represent and for volatility to be reduced by the diversification technique. (...)"
    Copyright ETF Strategy Ltd [Full text]


  • ETF Express (03/09/2015)
    EDHEC venture finds high volatility suits smart beta
    "(...) The EDHEC-Risk Institute venture, ERI Scientific Beta, reports that smart beta performance has benefited from high volatility conditions. The Scientific Beta Multi-Beta Multi-Strategy (MBMS) indices are outperforming cap-weighted indices, with year-to-date outperformance of 3.06 per cent the group reports, having taken the opportunity to review the performance of their Scientific Beta indices after the particularly volatile month of August on the markets. The firm’s Scientific Beta Multi-Beta Multi-Strategy flagship offering aims to offer very robust performance of smart beta indices in relation to their cap-weighted counterparts in all market conditions. (...)"
    Copyright GFM Limited [Full text]


  • Benefits and Pensions Monitor (02/09/2015)
    Smart Beta Day Showcases Investment
    "(...) The ‘EDHEC-Risk Smart Beta Day’ will showcase the latest conceptual advances and research results in smart beta investing. The one-day conference, organized by the EDHEC-Risk Institute in partnership with Scientific Beta, will focus on smart beta indexation and factor investing and smart beta solutions. It takes place in New York, NY, December 15. (...)"
    Copyright Benefits and Pensions Monitor [Full text]


  • IPE (September 2015)
    On the Record: Do you employ smart beta strategies?
    "(…) Three pension funds - FRR, NEST and USS - share their thoughts about smart beta strategies. Fonds de Réserve pour les Retraites (FRR), France, Olivier Rousseau, Executive director: (...) We favour value, small-cap and low volatility as factors, as we see evidence that they are systematically rewarded. We are more prudent about momentum, but nevertheless we are still planning to insert an element of ‘momentum plus value’ in our portfolio. Naturally, the more low-volume tilts you introduce, the more you reduce the beta in your portfolio, which means you get penalised when markets rise. We have tried to reduce the amount of unwanted bias in our portfolio by combining four different FTSE smart beta indices and creating a composite index, also calculated by FTSE. The four indices are FTSE Minimum Variance, RAFI QSR, EDHEC-Risk Efficient and FTSE Equal Risk Contributions. (…)"
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  • IPE (September 2015)
    Smart beta fixed-income: Not so fast
    "(…) While a growing body of evidence shows that it is possible to build ‘smart’ equity indices that outperform traditional market capitalisation-weighted indices, the same cannot be said for fixed income. So far, practical applications have yielded unconvincing results. (...) Felix Goltz, head of applied research at the EDHEC-Risk Institute, says: “Some strategies tend to privilege economic fundamentals rather than interest rate and credit risk. There seems to be story-telling around fundamentals, while there is no evidence that markets take them into account on a consistent basis.” (…)"
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  • IPE (September 2015)
    Analysis: What can Europe do?
    "(…) But the matter has been in the spotlight since 2007, when France, Germany, Italy and Portugal opposed a proposed revision of the European System of National and Regional Accounts. The revisions, which oblige countries to fully report public sector liabilities and end off-balance sheet accounting for governments, were finally adopted by the European Parliament in 2013. At the time, a study by EDHEC-Risk Institute showed countries that complied with the EU’s 3% annual deficit cap were far less “virtuous” if their public pension commitments were taken into full account, compared with high-deficit countries such as Italy or Portugal. (…)"
    Copyright IPE [Full text - Registration required]


August 2015

  • Financial Investigator (20/08/2015)
    ERI: Smart Beta Indices Performance Report July 2015
    "(...) Scientific Beta, an EDHEC-Risk Institute Venture, has published its Smart Beta Report of July 2015. Among the highlights of this month's report: This month, the best performing index in the Developed World universe among the smart factor indices is the SciBeta Developed High Momentum Diversified Multi-Strategy index, with a relative return of 1.14% compared to the broad cap-weighted index, while the SciBeta Developed Low Momentum Diversified Multi-Strategy index posts the lowest relative return (-1.81%). Performance for smart factor indices exposed to risk factors known to be well rewarded over long periods remains strong, with annual performance in excess of broad cap-weighted indices ranging from 0.88% to 3.08% since inception for the Developed universe. (...)"
    Copyright Financial Investigator Publishers [Full text]


  • Private Wealth Canada (10/08/2015)
    Investors Less Familiar With Risks
    "(...) Investors are familiar with the construction principles of advanced beta strategies, but less familiar with underlying risks and drivers of performance, says an EDHEC-Risk Institute survey. This lack of knowledge on risks poses a problem not only for the proper use of these alternative equity beta strategies, but also with respect to them being fairly marketed. As well, respondents allocate relatively few resources to the evaluation of alternative beta. The average respondent uses fewer than two full-time staff (1.77) to evaluate alternative beta offerings, a much lower number than that used to evaluate active managers (3.42). It says this shortfall in resources is illogical given that the same respondents see bigger challenges when evaluating advanced beta offerings than when evaluating active products. It found a lack of access to data, in particular live and after-cost performance, is seen as a key challenge as for all types of risks, respondents agree that information is not widely available from product providers. (...)"
    Copyright Private Wealth Canada [Full text]


  • Financial News (03/08/2015)
    Passive and/or Smart Beta Manager of the Year
    "(...) Financial News is delighted to announce the shortlist for its 14th annual Awards for Institutional Asset Management, Europe. The winners will be announced at a gala event in London in October. Here are the nominees in the category of Passive and/or Smart Beta Manager of the Year:
    Amundi
    The French asset manager is expanding across a number of fronts ahead of its planned IPO later this year, including index management and smart beta. Its assets under passive management grew by €9 billion during 2014 and hit €52 billion by June 30, 2015. It has set a target of nearly doubling this to $100 billion within three years, and plans to shortly launch passive management in Asia. Last September the fund manager launched a series of low-carbon indexes with MSCI, with the Swedish pension fund AP4 and French state fund FRR lined up as first adopters. In February 2014, the firm launched a partnership with French business school EDHEC to develop smart-beta exchange-traded funds for institutional clients.
    (...)"
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July 2015

  • Funds Europe (July/August 2015)
    EDHEC RESEARCH: Consumer Risk
    "(…) Developed market companies have increasing exposure to non-domestic regions and to emerging markets – which has implications for reporting the geographic risk exposure of equity portfolios, says the EDHEC-Risk Institute. In recent research (Accounting for Geographic Exposure in Performance and Risk Reporting for Equity Portfolios, EDHEC-Risk Publication, March 2015) produced as part of the Caceis research chair at EDHEC-Risk Institute, we analyse the usefulness of a company’s reported geographic segmentation data (total sales disaggregated into sales from different geographies) in performance reporting and performance attribution. (...)"
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  • Wealth Adviser (30/07/2015)
    EDHEC-Risk Institute raises concerns on smart beta
    "(...) Between January and February 2014, EDHEC-Risk Institute carried out a survey among a representative sample of 128 investment professionals to identify their views and uses of alternative equity beta. The study found that investors are familiar with the construction principles of advanced beta strategies, but less familiar with underlying risks and drivers of performance. According to EDHEC-Risk Institute, this lack of knowledge on risks poses a problem not only for the proper use of these alternative equity beta strategies, but also with respect to them being fairly marketed. (...) Key challenges in the use of smart beta lie in the lack of access to data, in particular live and after-cost performance, especially as for all types of risks, respondents agree that information is not widely available from product providers. (...) Implementation is a key aspect for respondents, the study found, as they commonly use a wide array of measures to assess implementation of alternative equity beta strategies (turnover, transaction costs, etc.), implying that product providers need to carefully consider implementation in product design. (...)"
    Copyright GFM Limited [Full text]


  • Actuarial Post (30/07/2015)
    Investors cautiously welcome advanced beta equity
    "(...) Investors recognise advanced beta equity investing as a promising avenue but call for caution on insufficient transparency and on the difficulties in implementing long/short strategies. (...) In a new study produced as part of the Société Générale Prime Services (Newedge) research chair on “Advanced Modelling for Alternative Investments”, EDHEC-Risk Institute attempts to give an overall view on alternative equity beta strategies, to determine the areas of usage and to analyse the alternative equity beta practices and perceptions of investment professionals. Between January and February 2014, EDHEC-Risk Institute carried out a survey among a representative sample of 128 investment professionals to identify their views and uses of alternative equity beta. (...)"
    Copyright Actuarial Post [Full text]


  • Property Funds World (28/07/2015)
    EDHEC-Risk Institute launches new EDHEC IEIF Quarterly Commercial Property Index (France)
    "(...) EDHEC-Risk Institute has launched the new EDHEC IEIF Quarterly Commercial Property Index (France), which replaces the EDHEC IEIF Commercial Property Index (France). This new index integrates fixed and variable capital SCPIs (unlisted French property investment trusts) invested in commercial property. The index is made up of SCPIs that, over the past year, have posted a volume of transactions on the secondary market in excess of EUR2 million. The secondary market is the market for share transactions governed by articles 421-1 and following of the General Regulation of the French Financial Market Authority. For fixed capital SCPIs, the price per share corresponds to the purchase price derived from the previous order book matching process. For variable capital SCPIs, the share price corresponds to the subscription price observed upon the last compensated share redemption process. The index is published quarterly, with publication occurring on the 20th of the second month following the end of each calendar quarter. (...)"
    Copyright GFM Limited [Full text]


  • Funds Europe (22/07/2015)
    EDHEC’s smart beta indices top $8 billion
    "(…) Assets tracking smart beta indices offered by EDHEC-Risk Institute, an academic organisation, have topped $8 billion (€7.4 billion). The institute, which is part of EDHEC Business School based in Nice, France, says its indices have seen triple-figure growth over the past year. EDHEC offers over 2,000 indices through its ERI Scientific Beta venture. The first iteration of its indices, known as Smart Beta 1.0, returned 2.1% performance over more than five years. EDHEC hopes its “Smart Beta 2.0” offering will surpass $12 billion in assets tracking its indices. Noël Amenc, chief executive of ERI Scientific Beta, says: “Smart beta is a commoditisation of two essential contributions from modern portfolio and asset pricing theory, namely allocating to factors that are well rewarded over the long term, and reducing unrewarded risks through diversification. (...)"
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  • ETF Strategy (21/07/2015)
    Assets linked to EDHEC-Risk Institute’s smart beta indices pass $8bn
    "(...) Assets tracking the smart beta indices of the EDHEC-Risk Institute have risen to over $8bn, with the success of their Multi-Beta Multi-Strategy offering, available in ETF format from Amundi and Morgan Stanley, helping to drive triple-digit growth over the past 12 months. This success has been underlined by the outperformance of their initial smart beta offering (so-called "Smart Beta") , which has delivered outperformance of 2.1% over the last five years. Now with the addition of their "Smart Beta 2.0" methodologies, which attempt to provide more advanced diversification of smart beta risks and seek to mitigate unrewarded risks, the institute expects to surpass $12bn in assets under advisement. (...)"
    Copyright ETF Strategy Ltd [Full text]


  • Financial Investigator (21/07/2015)
    EDHEC-Risk Institute smart beta indices top USD 8 billion
    "(...) In addition, as of July 15, 2015, the Scientific Beta platform had recorded over 17,000 frequent users seeking to analyse the performance and risk of smart beta strategies. Advocating total transparency of smart beta indices, the only genuine guarantee of the robustness of their performance and sound management of their risks, EDHEC Risk Institute, through this platform, which is accessible without restriction online (www.scientificbeta.com), provides free access not only to all performance data but also to the historical compositions and construction methodologies of the Scientific Beta indices. (...)"
    Copyright Financial Investigator Publishers [Full text]


  • Investment Europe (21/07/2015)
    EDHEC-Risk institute smart beta indices hit $8bn
    "(...) The value of assets tracking the EDHEC-Risk Institute smart beta indices has topped $8bn, according to the French research centre. The value has tripled over the past year, particularly with the adoption of its Scientific Beta Multi-Beta Multi-Strategy offering. Now the research institute is looking to increase the level of indexed assets to over $12bn by the end of 2015. A crucial driver will be the transparency built into EDHEC-Risk Institute’s approach to smart beta: it notes that the Scientific Beta platform offers fully open access to all performance data, historical compositions and construction methodologies of the Scientific Beta indices. (...)"
    Copyright Open Door Media Publishing Limited [Full text]


  • Financial News (20/07/2015)
    Succumbing to the allure of ETF 2.0
    "(...) Smart beta is often accused of eating active fund managers’ lunch. In June 2015, a report by analysts Cerulli Associates found institutions turning to smart beta ETFs because of dissatisfaction with active managers’ performance. Jennifer Muzerall, senior analyst at Cerulli, said: “Smart beta is being developed as an alternative to active management, in the sense that it is rules-based, still having elements of passive, but can offer more downside risk protection because it weights by factors other than market capitalisation.” Noël Amenc, chief executive at smart beta index provider ERI Scientific Beta, has said that smart beta can be seen as a “low-cost commoditisation” of active management. (...)"
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  • ETF Strategy (16/07/2015)
    Scientific Beta develops framework for assessing smart beta strategies
    "(...) One of the toughest challenges facing smart beta investors today is in determining how these strategies will perform over changing market environments. A new research paper from Scientific Beta offers investors guidance on what to look for when assessing ETFs and indices based on these strategies. Proponents of smart beta strategies believe that their outperformance comes as either a reward for weathering factor risks or by exploiting the behavioural inefficiencies present in the market. Opponents often criticise providers of such products as marketeers of investment strategies based on cherry-picked historical data. The truth may be somewhere in between and as such it is imperative that investors perform in-depth analysis of the long-term performance of these strategies. According to Scientific Beta, their publication "highlights the importance of a limited choice of factors with simple definitions to avoid the temptations of factor mining or factor fishing, which are among the main causes of the lack of relative out-of-sample robustness of smart beta strategies that are based on factor exposures. It also underlines the importance of allocating between smart factors that have decorrelated excess returns with respect to cap-weighted indices in order to favour the absolute robustness of the smart beta strategies implemented." (...)"
    Copyright ETF Strategy Ltd [Full text]


  • Benefits and Pensions Monitor (13/07/2015)
    Scientific Beta Releases Resource
    "(...) There is confusion in the area of smart beta because investors cannot be sure whether data is real and accurate or marketing jargon, says Scientific Beta’s 2015 edition of the ‘Journal of Index Investing.’ In the ‘Robustness of Smart Beta Strategies,’ it says that more than five years of live track record shows that, whatever the region, the smart beta strategy implemented outperforms the corresponding cap-weighted indices by an average of 2.1 per cent. But it is in the light of one of the best live track records for smart beta indices that Scientific Beta says that whatever the quality of the live performances exhibited, they cannot replace an in-depth assessment by investors and their consultants of the long-term performances of these. (...)"
    Copyright Benefits and Pensions Monitor [Full text]


  • Investment Europe (10/07/2015)
    “Investors need to check strength of smart beta strategies”
    "(...) This was the purpose of a recent Scientific Beta publication in the Summer 2015 edition of the Journal of Index Investing, entitled “Robustness of Smart Beta Strategies”: Robustness of Smart Beta Strategies, Summer 2015, Journal of Index Investing. This publication highlights the importance of a limited choice of factors with simple definitions to avoid the temptations of factor mining or factor fishing, which are among the main causes of the lack of relative out-of-sample robustness of smart beta strategies that are based on factor exposures. It also underlines the importance of allocating between smart factors that have decorrelated excess returns with respect to cap-weighted indices in order to favour the absolute robustness of the smart beta strategies implemented. (...)"
    Copyright Open Door Media Publishing Limited [Full text]


  • Benefits and Pensions Monitor (09/07/2015)
    Investors Pleased With Smart Beta ETFs
    "(...) Most investment professionals who have invested in smart beta ETFs are pleased overall, with 74 per cent declaring they are satisfied with them, says a survey by EDHEC-Risk Institute conducted as part of its Amundi ETF & Indexing research chair on ‘ETF and Passive Investment Strategies.’ ‘Investor Interest in and Requirements for Smart Beta ETFs’ found that, when asked about their list of top priorities for future product development in the ETF space, smart beta ETFs dominate the list of top items mentioned by investors. In fact, among investors’ six biggest priorities, four concern indices relating to smart beta approaches, namely smart beta equity (37 per cent), equity factor (31 per cent), equity style (29 per cent), and smart beta bond (25 per cent). The survey shows that a considerable share of investors still have concerns about these types of products, with lack of transparency being a major concern. (...)"
    Copyright Benefits and Pensions Monitor [Full text]


  • The Asset (09/07/2015)
    Industry leaders positive about prospects in first The Asset ETF Asia Summit
    "(...) The emergence of exchange-traded funds (ETF) is one of the most significant phenomena in the world of investment in the last decade, challenging established roles of mutual funds and active managers. The trend is fast catching on in Asian markets including Taiwan where the The Asset ETF Asia Summit 2015 was held joined by some of the most influential leaders in the industry. (...) "One of the key messages of the day was that it's very important to have education of investors if you want the ETF market to grow," says Frédéric Ducoulombier, founding director, EDHEC Risk Institute-Asia. "I think that these kind of events when they are put together with quality speakers and many angles is very helpful in moving the market forward." (...)"
    Copyright Asset Publishing and Research Limited [Full text]


  • Ignites Europe (08/07/2015)
    Signs of a new ETF rollout frenzy
    "(...) The smart-beta and factor-based investment theme has drawn new players, too. ETF Securities launched its first smart-beta ETFs this year after seeing smart beta’s share of industry ETF assets effectively double, says Mike McGlone, director of research. “It’s part of that natural migration from the actively managed mutual fund space to the more transparent ETF structure,” he says. The firm is known for its expertise in precious metal-backed exchange-traded products, so a key part of its expansion into smart beta has been the partnerships it made with index providers Zacks Investment Management and ERI Scientific Beta, the index development arm of European research house EDHEC Risk Institute. Both groups are known for their research capabilities, Zacks among individual investors for its earnings estimates and EDHEC among institutions for its study of factors driving fund performance. (...)"
    Copyright Ignites Europe (a Financial Times service) [Full text - Registration required]


  • Funds Europe (08/07/2015)
    EDHEC reveals trends in smart beta theory
    "(…) Smart beta experts, Professor Noel Amenc and Eric Shribini, revealed how far smart beta has progressed yesterday at an EDHEC-Risk Institute conference in London. They found that the first generation of smart beta strategies either tilted towards better-rewarded investment factors, or aimed at delivering better diversification than investors would get from a cap-weighted index. Research showed that performance strategies that were better diversified, outperformed factor indices that were tilted towards value over five years. (...)"
    Copyright Funds Europe [Full text - Registration required]


  • Citywire Global (08/07/2015)
    Multi-factor beta: six ways to shift from cap-weighted benchmarks
    "(...) Cap-weighted, factor-tilted indices are fundamentally limited by two main shortcomings: their concentration in a few stocks, which leads to poor risk-adjusted reward for a given factor exposure, and the dominance of large cap growth, which leads to an over exposure to systematic factors. This is according to Noel Amenc, chief executive of ERI Scientific Beta, whose multi-beta multi-strategy indices now guide many Ucits ETFs, including those of Morgan Stanley and Amundi. Amenc said that over five years of studying live performance strategies the better diversified beta strategies that incorporate a range of stock characteristics have outperformed factor indices tilted towards value alone. ‘Investing in one single factor leaves you vulnerable to big swings,’ said Amenc at a recent smart beta presentation. ‘Now the advancement of smart beta indices enables exposure to a range of stock characteristics, through diversification methods such as equal risk contribution, maximum decorrelation and efficient minimum volatility.’ (...)"
    Copyright citywireglobal.com [Full text]


  • Top 1000 Funds (08/07/2015)
    Capturing true geographic exposures in risk reporting
    "(...) New research by EDHEC-Risk Institute questions the usefulness of analysing geographic equities exposures based on the stock’s place of listing, incorporation or headquarters. Head of applied research, Felix Goltz, suggests that in a globalised marketplace, a more meaningful analysis of geographic risk exposures, and performance attribution, comes from looking at geographic segmentation data including total sales disaggregated into sales from different geographies. This type of reporting allows investors to take account of the real geographic risks of their portfolios, whether in constructing strategic or tactical allocations. (...)"
    Copyright Conexus Financial Pty Ltd. [Full text]


  • ETF.com (07/07/2015)
    When, If Ever, Will Active ETFs Take Off?
    "(...) Eric Shirbini, global product specialist with EDHEC Risk Institute, is quick to point out that the smart-beta trend is still in its infancy, so it's too soon to pin the unimpressive growth of actively managed ETFs on the impressive rise of smart-beta funds. The problem, he says, hinges on performance—or lack thereof. "The lack of good performance of active managers is because, in a bull market, it's very difficult for an active manager to outperform, and we've had quite a strong bull market recently," Shirbini told us. (...)"
    Copyright ETF.com [Full text]


  • Investment Week (06/07/2015)
    Contrarian: Why I am sceptical about the smart beta revolution
    "(...) Two recent EDHEC Risk Institute surveys, Investor Interest in Smart Beta and Alternative Equity Beta Investing, throw some valuable light on what the early adopters are up to in the smart beta space. These detailed surveys confirm my suspicion that smart beta is being deployed in a very traditional, active management style. The good news for smart beta fans is, despite my qualms, these strategies are becoming more popular with managers at the bigger institutions, especially those with funds under management in excess of £1bn. According to EDHEC, a quarter of their survey respondents already use products tracking smart beta indices, while another 40% not currently invested in these trackers are considering investing in them in the near future. (...) The EDHEC surveys also capture what I think will be the major impediments to growth for at least the next few years. Early adopters admit they are worried by the paucity of research expertise. According to EDHEC, the "average respondent uses fewer than two full-time staff to evaluate alternative beta offerings, a much lower number than used to evaluate active managers". There is also some very real concerns about the transparency of the indices and the lack of access to data and analytics. (...)"
    Copyright Incisive Business Media (IP) Limited [Full text]


June 2015

  • Hedge Funds Review (June 2015)
    Skewness strategies in commodity futures markets
    Article by Adrian Fernandez-Perez, Bart Frijns, Ana-Maria Fuertes and Joëlle Miffre
    "(…) Investors are known to display a preference for equities with positive skews or lottery-like payoff s and an aversion to equities with negative skews or those for which the probability of large losses is higher than that of similar large gains. As a result, equities with positive skews tend to be overpriced and thus offer low expected returns, while equities with negative skews tend to be underpriced and thus offer high expected returns. While the pattern is well documented in the equity market literature (Amaya et al, 2015), the question as to whether skewness matters to the pricing of commodity futures has not yet been addressed. This article is aimed at filling that gap in the literature by designing and analysing the performance of novel skewness strategies in commodity futures markets. Special attention is devoted to testing the robustness of our results and to the strategic role of the newly designed skewness portfolio as inflation hedge and risk diversifier. (...)"
    Copyright Incisive Risk Information (IP) Limited [www.risk.net/hedge-funds-review]


  • ETF Strategy (30/06/2015)
    Confidence in smart beta ETFs high, reveals EDHEC-Risk
    "(...) A quarter of investors are using smart beta strategies according to the 2014 EDHEC Risk Institute survey of ETF usage, with half of those employing ETFs to implement these strategies. The survey, produced with the support of Amundi, a leading European ETF provider, provides an optimistic outlook for the smart beta industry. The results point to significant growth in assets under management and product launches in the coming years, driven by a belief that these strategies can beat market capitalisation-weighted indices and the evolution of their role in the portfolio construction process. Acceptance of smart beta in the investment community is high with 71% of respondents agreeing that the strategies have the potential to beat market capitalisation-weighted indices and 40% considering investment in such strategies in the near future. Investors appear to be optimistic that individual factors will be rewarded too, however this varies according to the factor in question. The survey shows that the highest level of confidence is in the value and size factors while low volatility received the lowest rating. Investors’ waning belief in low volatility strategies is perhaps reflective of expectations that the popularity of this strategy following the financial crisis has competed away prospective returns. (...)"
    Copyright ETF Strategy Ltd [Full text]


  • Funds Europe (June 2015)
    EDHEC RESEARCH: A smart idea
    Article by Felix Goltz, head of applied research at EDHEC-Risk Institute
    "(…) Investors are keen on smart beta ETFs, says Felix Goltz of the EDHEC-Risk Institute, who illustrates the popularity of investment factors. But investors also place demands on their providers, including evidence that alternative beta works. It appears that investors show considerable interest in smart beta exchange-traded funds (ETFs) and have strong requirements for them. A quarter of respondents to the EDHEC European ETF survey 2014, supported by Amundi ETF & Indexing, already used products tracking smart beta indices, and 40% of them do not currently invest in such products but are considering investing in them in the near future. The fact that there are more respondents who are considering an initial investment than there are actually investing implies that we are likely to see strong growth of usage of smart beta ETFs in the future. Moreover, when asked about their priorities for future product development in the ETF space, smart beta ETFs dominate the list of items mentioned by investors. (...)"
    Copyright Funds Europe [Full text - Registration required]


  • Financial Standard (29/06/2015)
    Advisers waiting on the sidelines with smart beta
    "(...) His view matches the results of the EDHEC-Risk Institute "Investor Interest in and Requirements for Smart Beta ETFs" report, which gathered views from 222 institutional investors and private wealth advisers in Europe. The survey found that 88% of the respondents think that smart beta indices require full transparency on methodology and risk analytics. Investors expressed concern at the transparency of "ETFs that track the most complex indices, and that are sold primarily for their outperformance." (...)"
    Copyright Rainmaker Group [Full text]


  • Portfolio Adviser (25/06/2015)
    Investors deeply concerned by smart beta transparency
    "(...) Nine out of 10 investors are harbouring major concerns over the lack of transparency in the smart beta ETF space, according to research by EDHEC-Risk Institute. The report, which surveyed 222 professional investors across the UK and Europe and was published 23 June, showed that 88% of those questioned saw a lack of transparency around smart beta indices as a “major concern”. Respondents highlighted methodology and risk analytics processes as the primary areas requiring increased clarity, with the vast majority of investors unsure as to how potential smart beta investments operate. Furthermore, 82% of those questioned outlined capturing factor premia as their main priority when investing in smart beta ETFs, putting forward – in order of importance – ease of implementation, low turnover and transaction costs, a rational risk premium, and documentation of the factor premium in empirical literature as aspects they look for when considering products. (...)"
    Copyright Last Word Media Limited [Full text]


  • Global Investor (24/06/2015)
    Smart beta transparency remains key concern
    "(...) EDHEC-Risk Institute finds that low level of transparency, which is routinely justified by the use of proprietary models, makes the evaluation of risks difficult. (...) A considerable number of investors have concerns regarding smart beta exchange-traded funds (ETFs), despite most investors in the products being pleased with their purchase, according to the EDHEC-Risk Institute. Lack of transparency in particular remains a key concern. "While transparency is important for market indices (i.e. indices that aim to represent a given market or segment), it is all the more so for smart beta indices. Indeed, while these new forms of indices can provide investors with improved risk-reward profiles or other benefits, they bring distinct risks of their own," stated the report. "Unfortunately, these indices’ low level of transparency, which is routinely justified by the use of proprietary models, makes the evaluation of risks difficult." Most of the survey respondents (88%) agreed that smart beta indices require full transparency on methodology and risk analytics. (...)"
    Copyright Euromoney Institutional Investor PLC [Full text]


  • Ignites Europe (24/06/2015)
    Amundi launches smart beta index fund
    "(...) Amundi has rolled out its first open-ended index fund to cover several different smart beta factors following the launch of its first multi-factor exchange traded fund a year ago. The new Amundi Index Equity Global Multi Smart Allocation Scientific Beta is now available to investors in France, the UK and other key European markets. The new product by Europe’s largest asset manager gives investors exposure to the Scientific Beta Developed Multi-Beta Multi-Strategy ERC strategy index, which consists of some 2,000 stocks from large and mid-cap companies in developed markets. The index tracks the performance of four weighted sub-indices that combine the four factors of volatility, size, momentum and valuation with five smart beta diversification strategies. The sub-indices are accessed via the EDHEC Risk Institute’s Scientific Beta platform. The French group says the new index fund is designed to “provide a robust and transparent solution for investors over the long term”. (...)"
    Copyright Ignites Europe (a Financial Times service) [Full text - Registration required]


  • Wealth Adviser (24/06/2015)
    Amundi enlarges ‘Smart Beta’ offering with first Multi Smart Beta open-ended index fund
    "(...) Amundi is further expanding its index range with the launch of a new index fund, Amundi Index Equity Global Multi Smart Allocation Scientific Beta, which is now available in France, the UK and main European markets. (...) Investors who wish to implement a Multi Smart Beta strategy, therefore, now have two available solutions within Amundi’s range: this new open-ended index fund and the ETF, launched in June 2014, which celebrates its first year of trading on Euronext and has already reached an AUM of nearly EU400 million. Valerie Baudson, Global Head of ETF, Indexing and Smart Beta at Amundi, says: "Multi-factor Smart Beta strategies represent a very important area of growth. To meet increasing client demand, Amundi has therefore developed a wide range of Smart Beta solutions with the aim of remaining at the forefront of innovation." (...)"
    Copyright GFM Limited [Full text]


  • Money Management (24/06/2015)
    Transparency of smart beta ETFs a concern
    "(...) Smart beta exchange traded funds (ETF) still lack appropriate levels of transparency with a strong majority of professional users of the funds expressing concerns over the difficulty of assessing risks within the funds. However, this concern has not dampened appetite for smart beta ETFs with use expected to increase according to a survey of public and private European asset managers conducted by European fund manager Amundi and EDHEC-Risk Institute. The survey covered 222 investment decision makers at the chief executive, chief investment officer, asset allocation and portfolio management levels in institutional and private wealth managers in 27 European countries. According to a report on the survey, which was released yesterday, 88 per cent of respondents stated that smart beta indices required full transparency on methodology and risk analytics. The report stated transparency offered protection against conflicts of interests and would improve the ‘informational efficiency' of the indexing industry but was lagging within the smart beta ETF sector. (...)"
    Copyright Cirrus Media [Full text]


  • Financial Standard (24/06/2015)
    Investors concerned smart beta lacks transparency
    "(...) Investors fear that smart beta indices lack full transparency on methodology and risk analytics, global research found. "Respondents appear to have major concerns about the quality of these products," the EDHEC-Risk Institute "Investor Interest in and Requirements for Smart Beta ETFs" report concluded. It found that 88% of the investors surveyed think that smart beta indices require full transparency on methodology and risk analytics. "Unfortunately, these indices' low level of transparency, which is routinely justified by the use of proprietary models, makes the evaluation of risks difficult," the report said. Investors also expressed concern at the transparency of "ETFs that track the most complex indices, and that are sold primarily for their outperformance." However, satisfaction with smart beta ETFs is high, with 74% of investors declaring they are satisfied. When asked about their list of priorities for future product development in the ETF space, smart beta ETFs dominate the list of top items and was mentioned by 37% of investors. Ease of implementation, low turnover and transaction costs were rated 3.66 on a scale from 0 to 5. Rational risk premium was rated at 3.61 and documentation of the factor premium in empirical literature at 3.45. (...)"
    Copyright Rainmaker Group [Full text]


  • Investment Europe (23/06/2015)
    Amundi expands smart beta offering
    "(...) Amundi expands its index range with the launch of the Amundi Index Equity Global Multi Smart Allocation Scientific Beta Index, available in France, the UK and main European markets. The fund provides exposure to a selection of around 2000 stocks issued by large and mid-cap companies in developed countries. It aims to provide improved risk-adjusted performance compared to a cap-weighted index. The index tracks the performance of four weighted sub-indices accessed via the EDHEC Risk Institute’s Scientific Beta platform. Valerie Baudson, global head of ETF, Indexing and Smart Beta at Amundi, said: “Multi-factor smart beta strategies represent a very important area of growth. To meet increasing client demand, Amundi has therefore developed a wide range of smart beta solutions with the aim of remaining at the forefront of innovation.” The new index comes in addition to the existing Amundi Multi Smart Beta ETF launched in June 2014, which currently manages around €400m. (...)"
    Copyright Open Door Media Publishing Limited [Full text]


  • ETF Express (23/06/2015)
    Concerns remain on transparency of smart beta ETFs
    "(...) A survey of investment professionals conducted as part of the Amundi ETF & Indexing research chair at EDHEC-Risk Institute on “ETF and Passive Investment Strategies,” has solicited the views of European ETF investors on “smart beta” ETFs. The results have been compiled into a study entitled “Investor Interest in and Requirements for Smart Beta ETFs.” The Institute reports three key findings. The first is that those who have invested in smart beta ETFs are pleased overall: about three-quarters (74 per cent) of smart beta ETF users declare that they are satisfied with them. Further, when asked about their list of top priorities for future product development in the ETF space, smart beta ETFs dominate the list of top items mentioned by investors. In fact, among investors’ six biggest priorities, four concern indices relating to smart beta approaches, namely smart beta equity (37 per cent), equity factor (31 per cent), equity style (29 per cent), and smart beta bond (25 per cent). A considerable share of investors still have concerns about these types of products. (...)"
    Copyright GFM Limited [Full text]


  • Portfolio Adviser (23/06/2015)
    Amundi adds index tracker to smart beta offering
    "(...) Amundi has bolstered its smart beta offering with the launch of a multi-strategy index fund targeting European large and mid-cap stocks. The Amundi Index Equity Global Multi Smart Allocation Scientific Beta Fund will track the Scientific Beta Developed Multi-Beta Multi-Strategy ERC index, sitting alongside Amundi’s ETF alternative. The index comprises around 2000 developed market large and mid-cap stocks, utilising four weighted sub-indices which account for volatility, valuation, size and momentum while blending five smart beta diversification strategies. (...)"
    Copyright Last Word Media Limited [Full text]


  • Expert Investor Europe (23/06/2015)
    ETF users want more EM equity and smart beta flavours
    "(...) Emerging market equities and factor investing are the two areas where European investors want to see more and different ETF products, according to a recent survey of 222 European investors by the EDHEC Risk Institute in France. According to the study, which was commissioned by asset manager Amundi, 43% of respondents are craving for better ETFs in EM equities, while the next three spots on the investor wish list all concern smart beta strategies (even though smart beta ETFs have been flooding the market in recent years), suggesting it’s these two areas which (still) have the best growth prospects. This is especially good news for smart beta ETFs, which are currently used by about half of Europe’s ETF-users, according to the survey. (...)"
    Copyright Last Word Media Limited [Full text]


  • Le Figaro (23/06/2015)
    Amundi lance un nouveau fonds indiciel "Multi Smart Beta"
    "(...) Amundi poursuit le développement de sa gamme indicielle avec un nouveau fonds ouvert : AMUNDI INDEX EQUITY GLOBAL MULTI SMART ALLOCATION SCIENTIFIC BETA. Lancé en France, ce fonds sera également prochainement commercialisé sur les principaux marchés européens. Ce fonds indiciel propose une exposition à l'indice de stratégie Scientific Beta Developed Multi-Beta Multi-Strategy ERC, composé d'environ 2000 actions issues de l'univers des moyennes et grandes capitalisations des marchés développés. Celui-ci vise à générer un rendement supérieur à celui de l'indice portant sur le même univers d'investissement pondéré par la capitalisation boursière. L'indice de stratégie réplique la performance de quatre sous-indices sélectionnés et pondérés parmi les indices disponibles sur la plateforme d'Edhec Risk Institute Scientific Beta. Ces derniers croisent sur ce même univers quatre schémas de sélection de titres (ou facteurs : Value, Mid Cap, Momentum, Low volatility) et cinq stratégies de diversification Smart beta. (...)"
    Copyright Le Figaro [Full text]


  • IP Real Estate (June 2015)
    A coming of age
    "(…) But as Frederic Blanc-Brude of EDHEC-Risk Institute argues, it might be misleading to “bundle” infrastructure with the wider universe of real assets. While real estate and infrastructure assets might be tangible, one has intrinsic value in the land, while the other is dependent on contracts. “Infrastructure is not a store of value,” he says. “If it cannot be used, it is not worth anything.” (…)"
    Copyright IPE [Full text - Registration required]


  • Financial News (15/06/2015)
    Regulators ride roughshod over academic advice
    Article by Noël Amenc, professor of finance at EDHEC Business School, director of EDHEC-Risk Institute and chief executive of ERI Scientific Beta
    "(...) Academics can produce mountains of research on financial services, with insights of outstanding brilliance, but there is little virtue in doing any of it if the results are not applied by the industry. (...) Regulators, however, have eluded us. In fact, anxious to respond rapidly to pressure to increase regulation – whatever the costs or unintended consequences – regulators have rarely taken the time to reflect on the specific nature of the relationship between long-term investment and the prudential framework, and more broadly on how their proposed regulation relates to the results of academic research. I could give many examples of this gap between regulation and academic research outcomes, but will restrict myself to an objective that regulators have said was a priority – the fight against speculation. (...)"
    Copyright Financial News [Full text - Registration required]


  • Financial News (09/06/2015)
    In search of the sweet spot
    "(...) Paris-based academic institute EDHEC-Risk identifies four factors underpinning smart beta strategies that research suggests deliver reliable, long-term performance: value, momentum, low volatility and size. In a report published in March, EDHEC said there was evidence that two more factors – high profitability, and low investment – could be successful in the long run. Both strategies aim to tilt portfolios to “high quality” stocks, as characterised, for example, by high profitability, stable earnings or low leverage. However, Eric Shirbini, global product specialist at EDHEC’s indexing venture ERI Scientific Beta, said most new smart beta developments lacked supporting research other than back-testing. Some strategies also amend established factors to make them proprietary. Shirbini said: “We are really against that, because as soon as you start modifying the factors you don’t know what risks you are actually giving the investor.” (...)"
    Copyright Financial News [Full text - Registration required]


  • Financial News (09/06/2015)
    Providers keep methodology under wraps
    "(...) Frédéric Ducoulombier, associate professor of finance at EDHEC Business School, said: “Because smart beta indices are different to cap-weighted ones, they involve different risks that need to be understood. Doubts about the robustness of their performance are the number one stumbling block for investors adopting smart beta strategies.” According to EDHEC's 2014 European ETF Survey, published in March 2015, 88% of investors agreed that smart beta indices require full transparency on methodology and risk analytics. (...) Edhec’s research found that investors ranked doubts over the robustness of performance data as their top hurdle to investment. Ducoulombier said: “It’s easier to sell something that has a recent story of success, which creates an inherent conflict for the index providers. If they have created a track record with the benefit of hindsight, there is a high chance the performance displayed will not be robust as it is likely to have exploited methodological leeway to get a good simulated track record. This doesn’t have to be intended. Inside bias can creep in through inadequate attention to quality of data.” Without a higher degree of transparency on index methodology, he argues, investors cannot gauge the ability of an index to perform the same way in similar market conditions and cannot understand how a product would interact with other assets in a portfolio. (...)"
    Copyright Financial News [Full text - Registration required]


  • IP Real Estate (09/06/2015)
    Investors advised against "bundling" infrastructure with real assets
    "(…) Investors should avoid categorising infrastructure by industry sector and “bundling” it with real assets, according to a leading academic. Frédéric Blanc-Brude, research director at EDHEC-Risk Institute, told IP Real Estate that such practices do not create useful information for asset allocation or benchmarking. “The emphasis on infrastructure as a ‘real asset’,” he said, “encourages investors to fixate on industrial sectors rather than contractual and financial structures, when the latter explain most of the risk profile and required returns.” EDHEC-Risk Institute is working alongside industry associations, including the Long-Term Infrastructure Investors Association (LTIIA) to create a series of benchmarks for the asset class. EDHEC is also collecting data from investors, partly in response to demand from regulators and partly to help asset allocators and investors assess performance. It has published a paper describing the framework and the data needed to create infrastructure debt and equity investment benchmarks and is building a database, which will include 15 to 20 years of cash flows for at least 1,500 infrastructure investments worldwide by 2016. (…)"
    Copyright IPE [Full text - Registration required]


  • Institutional Investor (June 2015)
    A breakneck pace
    "(...) Indeed, the European ETF market has experienced impressive growth in recent years. “This is the result of the growing recognition from investors of the importance of flexible asset allocation in constructing portfolios,” says Valerie Baudson, global head of ETFs, indexing and Smart Beta at Amundi. Last year was very positive for ETFs and the European market experienced a 25 percent increase in assets under management. “In the first part of the year, we still observe high inflows, and we expect the European ETF market to continue to grow by more than 25 percent during 2015,” she says. A recent survey conducted by the EDHEC Risk Institute demonstrates that ETF investors plan to increase their use. “The data show a growing appetite for reliance on ETFs for greater aspects of portfolio management,” she says. Until recently, ETFs had been used generally as portfolio reallocation tools or as a means for tactical exposures. “They are now are becoming candidates for core investment strategies,” she says. The EDHEC survey shows that ETFs now are mainly used for long-term exposure to broad market indices. (...)"
    Copyright Institutional Investor LLC [Full text]


  • IPE (June 2015)
    The language of infrastructure
    Article by Frederic Blanc-Brude, director of the EDHEC infrastructure research programme
    "(…) Pension funds and insurers discovered infrastructure investing, somewhat counter-intuitively, at about the same time they began adopting the principles of factor investing. So the search for an infrastructure asset class started just as other asset classes were being gradually rejected as unreliable portfolio building blocks. The goal of seeking exposure to investment factors – which can sometimes seem like the post-modern deconstruction of asset management – really amounts to the search for a well-specified model of asset returns. It is the recognition that taxonomies that are not built to capture an underlying value process can lead risk management astray if assets are given similar labels when fundamentally different forces drive their performance. Notional groupings of assets (such as stocks, bonds and private equity) often create neither information nor predictive power. What are the implications of these evolutions for long-term investment in infrastructure? (…)"
    Copyright IPE [Full text - Registration required]


  • Wall Street Journal (07/06/2015)
    Second Wave of ‘Smart Beta’ ETFs Is Coming
    "(...) While Lattice’s ETFs are based on its own proprietary indexes, third-party index providers MSCI, EDHEC-Risk and FTSE-Russell are also in the multifactor game. Each index has a specific bent or tweak to its methodology that attempts to differentiate its returns. (...) And fund firms ETF Securities and Global X Funds have each built multifactor ETFs based on indexes developed by EDHEC-Risk, a unit of the EDHEC Business School in Lille, France. According to Mike McGlone, head of research at ETF Securities in New York, the new ETFs “provide an extensive and robust solution to address the drawbacks of market-cap weighted indexes,” which tend to lean toward large-cap, growth stocks. “Exposure to the four main factors—size, low volatility, momentum and value—avoids a bet on a particular factor,” he says. “And it helps smooth out the differing cycles that individual sectors are susceptible to.” (...)"
    Copyright Dow Jones & Company, Inc. [Full text]


  • ETF Trends (04/06/2015)
    A Unique Multi-Factor ETF for U.S. Equity Exposure
    "(...) There are single factor and multi-factor exchange traded funds, both of which are proliferating, meaning it can be difficult for some new entrants to this ETF genre to standout. The ETFS Diversified-Factor U.S. Large Cap Index Fund (NYSEArca: SBUS), which debuted in late January, might just be one of the broad market, multi-factor ETF standouts and not just because the fund has outpaced the S&P 500 by about 200 basis points since coming to market. SBUS tracks the Scientific Beta United States Multi-Beta Multi-Strategy Equal Weight Index, which “uses a proprietary weighting strategy to provide well diversified exposure, by combining 5 models: Maximum Deconcentration, Maximum Decorrelation, Efficient Minimum Volatility, Efficient Maximum Sharpe Ratio, and Diversified Risk Weighted,” according to ETF Securities. That might sound jargony and wonky, but in reality, SBUS is fairly straightforward and less complex than new rivals that also use the multi-factor approach. SBUS and its European equivalent, the ETFS Diversified-Factor Developed Europe Index Fund (NYSEArca: SBEU), were the first U.S.-listed ETFs to track EDHEC Scientific Beta multi-factor indexes. (...)"
    Copyright Global Trends Investments [Full text]


May 2015

  • Institutional Investor (28/05/2015)
    New Strategies for Improving Risk-Adjusted Returns
    "(...) Eric Shirbini, global product specialist with ERI Scientific Beta in London, says there are only a limited number of factors with sufficient academic evidence to support their use in a portfolio. “The traditional factors are value, momentum, size and low-volatility,” says Shirbini, whose firm is part of the EDHEC-Risk Institute in Nice, France. Now, the evidence suggests two new risk factors: high profitability (companies with a high return on assets) and low investment (relative to the asset base), he adds. (...) Diversification is a key issue in constructing a factor strategy, says Shirbini. “Exposure to a single risk factor might work in your favor in some market conditions, but not in others,” he says. “A combination of factors can help smooth your portfolio performance over time, with potential benefits in all market conditions.” Shirbini’s firm calculates a wide range of “smart beta” indices to give investors a choice of factor strategies. “We believe in providing efficient access to a particular factor (through diversification) as well as by replicating a smart beta index using an asset manager with low execution cost,” he says. “The index construction process allows the investor to see exactly how the strategy has been constructed.” (...)"
    Copyright Institutional Investor LLC [Full text]


  • Bloomberg (26/05/2015)
    Bloomberg Advantage: del Ama Discusses ‘Scientific Beta’
    "(...) The Bloomberg Advantage with Carol Massar and Vonnie Quinn. GUEST: Bruno Del Ama Chief Executive Officer Global X Management Co LLC Discussing how to find income in current volatile environment and investing in MLPs and ETFs. (...)"
    Copyright Bloomberg L.P. [Recording]


  • ETF.com (25/05/2015)
    Smart Beta Transparency: In The Eyes Of The Beholder
    "(...) However, surveys conducted by the think tank and business school EDHEC Risk Institute in recent years have shown a desire among investors for a greater degree of transparency around the calculation methodology of the smart beta indexes these ETFs are based on. Their 2014 European ETF Survey showed only 35 percent of investors were satisfied with the level of transparency in the indexing industry and investors were strongly in favour of higher standards. In their 2015 Survey the vast majority of respondents (88 percent) said full transparency on methodology and risk analytics was necessary. According to Frederic Ducoulombier, associate professor of finance at EDHEC Business School: “While transparency is important for market indices, which aim to represent a given market or segment, it is all the more so for strategy indices that try to achieve a given risk/return objective. Indeed, while the latter can provide investors with improved risk/reward profiles or other benefits, they bring distinct risks of their own, notably the risk of periodic underperformance vis-à-vis market indices, which to date remain the primary benchmarks.” (...)"
    Copyright ETF.com [Full text]


  • IPE (20/05/2015)
    European Parliament OKs Brussels plan for benchmark regulation
    "(…) The European Parliament has approved the negotiating mandate for European Commission plans to increase the regulation of benchmarks in the wake of the LIBOR and EURIBOR scandals. (...) In a survey done last year, academic think-tank EDHEC Risk-Institute showed investors were not satisfied with the increased governance requirements on index and benchmark providers and said transparency was key to manage conflicts of interest. (…)"
    Copyright IPE [Full text - Registration required]


  • Funds Europe (17/05/2015)
    ETFs: The ETF illiquidity conundrum
    "(…) The meteoric rise of exchange-traded funds (ETFs) since the financial crisis has resulted in these products now approaching $3 trillion (€2.7 trillion) in assets under management globally. But there have been claims that the liquidity promised by these funds, especially in the fixed income space, is illusory and would disappear with market turmoil. (...) Felix Goltz, head of applied research at EDHEC-Risk Institute, says: “Mass redemption is a problem for the underlying asset class. If there is market turmoil and people want to sell their corporate bonds, if they’re not entirely liquid there may be downward pressure on the price.” (...) Goltz says there’s a problem with creating liquid indices as they focus on a small segment of the most liquid corporate bonds. Therefore instead of having 1,000 corporate bonds, they will only have 20 or 40 bonds. “The problem you get into, then, is stability of the index, because if you are only holding 20 or 30 bonds you can have large variations in sector exposure and credit risk exposures, and duration and composition will change a lot depending on liquidity on the underlying bonds,” says Goltz. (...)"
    Copyright Funds Europe [Full text - Registration required]


  • Funds Europe (May 2015)
    EDHEC RESEARCH: The other great rotation
    "(…) The increasing variety of bond ETFs and competition among providers has given investors ample room to choose high-quality products, says Felix Goltz of the EDHEC-Risk Institute. Meanwhile, more investors are replacing active managers with ETFs. Satisfaction with standard exchange-traded funds (ETFs) has generally remained at high levels, especially for traditional asset classes, according to the eighth EDHEC-Risk Institute survey on the usage and perceptions of ETFs. (...)"
    Copyright Funds Europe [Full text - Registration required]


  • ETF Trends (14/05/2015)
    A Scientific Approach to Europe ETFs
    "(...) The ETFS Diversified-Factor Developed Europe Index Fund (NYSEArca: SBEU) is an avenue worth considering for the investor looking for multi-factor exposure to developed Europe equities. With the recent launch of new scientific beta ETFs, it should be noted that SBEU and its U.S. counterpart, the ETFS Diversified-Factor U.S. Large Cap Index Fund (NYSEArca: SBUS), were among the first scientific beta ETFs to list in the U.S. In many cases, smart beta ETFs isolate a single investment factor, such as low volatility, size or value. Multi-factor ETFs, such as SBEU, improve on that concept. Remember, the goal of factor-based investing is to deliver superior risk-adjusted returns. SBEU benchmarks to Scientific Beta Developed Europe Multi-Beta Multi-Strategy Equal Weight Index, which “is composed of the 700 largest and most liquid stocks listed in the following countries: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom,” according to ETF Securities. (...)"
    Copyright Global Trends Investments [Full text]


  • ETF Express (14/05/2015)
    Global X launches family of Scientific Beta ETFs
    "(...) Global X Funds, a New York-based provider of exchange-traded funds (ETFs), has launched a family of four ETFs based on EDHEC-Risk Institute's Scientific Beta indexes. (...) The Scientific Beta ETFs provide core equity exposure to the US, Europe, Asia ex-Japan and Japan. The new funds may be considered alternatives to actively managed funds as they seek to outperform market cap-weighted indices at a fraction of the fees typically charged for active management. The funds seek to deliver outperformance by tracking academically driven multi-factor indexes developed by ERI Scientific Beta.(...)"
    Copyright GFM Limited [Full text]


  • Financial Review (14/05/2015)
    Complex multi-factor funds promise us all a beta mousetrap
    "(...) A new answer is multi-factor funds. Combine several factors in one fund, and the dominant factor of the moment will always pull you through. And you might just have reached the holy grail of a fund that stays ahead of the market all the time. How do they do it? Two recent offerings use different approaches. Global X is launching a fund that combines four factors, using an approach designed by the EDHEC-Risk Institute, with "scientific beta" indices combining value, size (small stocks do well), low volatility and momentum. (...)"
    Copyright Fairfax Media Publications Pty Ltd [Full text]


  • ETF Trends (14/05/2015)
    Smart-Beta, Multi-Factor ETFs for a Diversified Investment Approach
    "(...) Expanding the growing group of smart-beta strategies, exchange traded fund providers are crafting multi-faceted funds with a medley of investment factors to help investors stay ahead of the markets. For instance, Global X recently launched its suite of so-called scientific beta ETFs that are based off EDHEC-Risk Institute indices that utilize multiple factors, including low-volatility, momentum, size and value. The recently launched ETFs include the Global X Scientific Beta US ETF (NYSEArca: SCIU), which tries to outpace cap-weighted indices with less volatility, Global X Scientific Beta Europe ETF (NYSEArca: SCID), Global X Scientific Beta Asia ex-Japan ETF (NYSEArca: SCIX) and Global X Scientific Beta Japan ETF (NYSEArca: SCIJ). (...)"
    Copyright Global Trends Investments [Full text]


  • ETF.com (13/05/2015)
    Daily ETF Watch: More Multifactor Funds
    "(...) Today Global X jumped into the world of smart beta with both feet, rolling out four multifactor ETFs covering a variety of market segments. (...) All four made their debut on the NYSE Arca exchange. (...) The funds track indexes from EDHEC’s Scientific Beta unit and target four factors: value, size, low volatility and momentum. Each factor is weighted according to five different weighting approaches that are then averaged for each factor. The five weighting schemes are equal weighting; maximum de-correlation; efficient minimum volatility; efficient maximum Sharpe ratio; and diversified risk-weighted. Multifactor funds are cropping up all over these days. Earlier this year, ETF Securities, rolled out two multifactor ETFs tracking Scientific Beta indexes that have a similar approach. (...)"
    Copyright ETF.com [Full text]


  • ETF Trends (13/05/2015)
    Beta Gets Scientific With These new Global X ETFs
    "(...) Smart beta exchange traded funds have been around awhile, perhaps longer than many advisors and realize. Now, Global X is taking the scientific approach to beta with the introduction of four new ETFs. Global X’s new scientific beta ETFs are factor-based funds, but rather than isolating a single factor, such as momentum or value, the new ETFs emphasize the following four factors: Low volatility, momentum, size and value. (...) “Rather than providing exposure to a single factor, like a Large Cap Value fund, the Global X Scientific Beta ETFs select stocks in a method that provides exposure to four factors simultaneously: Value, Size, Momentum, and Low Volatility. While individually each factor has historically outperformed the market, the Scientific Beta strategy seeks to smooth the cyclicality of their returns and deliver more consistent outperformance by combining multiple factors together,” according to Global X. (...)"
    Copyright Global Trends Investments [Full text]


  • Financial Times (13/05/2015)
    Why multi-factor funds are smarter beta
    "(...) Global X is launching a fund that combines four different factors in an index designed by the EDHEC-Risk Institute. The “Scientific Beta” indices combine four factors — value, size (small stocks do well), low volatility and momentum. It takes an underlying index, and constructs four different indices from it. For example, the value index includes only those that show up as cheapest. It then allocates weightings to each of these subindexes. Over time, some will do better than others, and so there is periodic rebalancing. This can happen once a quarter, but in historic back tests rarely happens more than once a year (to limit turnover). This rebalancing can be tweaked to take advantage of factors’ cyclicality. If EDHEC’s algorithm sees that the parent index is being driven by one particular factor — for example, value — then it will overweight value slightly. The result, if all works well, is a fund that keeps its nose slightly ahead of the market. (...)"
    Copyright Financial Times [Full text]


  • ETF.com (11/05/2015)
    Daily ETF Watch: More Smart Beta Funds Coming
    "(...) A recent filing from Global X raises the possibility that it may launch its family of multifactor ETFs sometime quite soon. (...) The funds track indexes from EDHEC’s Scientific Beta unit and target four factors: value, size, low volatility and momentum. Each factor is weighted according to five different weighting approaches that are then averaged for each factor. The five weighting schemes are equal weighting; maximum de-correlation; efficient minimum volatility and efficient maximum Sharpe ratio; and diversified risk-weighted. (...)"
    Copyright ETF.com [Full text]


  • ETF.com (08/05/2015)
    Under The Hood With Multifactor ETFs
    "(...) Multifactor ETFs are the new budding trend in the smart-beta universe. Issuers have been bringing their multifactor ETFs to market in recent months, looking to combine factor and strategy in a single wrapper. (...) The ETFS Diversified-Factor U.S. Large Cap ETF (SBUS) and the ETFS Diversified-Factor Developed Europe Index Fund (SBEU) are designed with layers upon layers of diversification that involve not only offering exposure to various factors, but they each apply a complex weighting methodology within these factors to minimize other risks associated with stocks. Eric Shirbini, global product specialist with EDHEC Risk Institute, told us these ETFs are designed to deliver better risk/return than a traditional allocation to equities in the long run. We talked to him about what makes these multifactor approaches so innovative, and why investors should care. (...)"
    Copyright ETF.com [Full text]


  • ETF.com (06/05/2015)
    Daily ETF Watch: Long/Short Debt Fund Plan
    "(...) To a lesser degree, ETF Securities has dipped its toe into the equities waters in January by launching two factor-focused funds tracking EDHEC Risk’s Scientific Beta indexes and focusing on momentum, volatility, size and value. (...)"
    Copyright ETF.com [Full text]


    April 2015

  • L'Agefi Suisse (22/04/2015)  
    ERI Scientific Beta: nouvelles familles indices factoriels
    "(...) ERI Scientific Beta a annoncé hier l’ajout de deux nouvelles familles d’indices factoriels sur actions, l’une basée sur la rentabilité l’autre sur les investissements (low investing), toutes deux étant des facteurs appartenant à la famille des facteurs dits de «qualité». (...)"
    Copyright L'Agefi Suisse [Full text - French - Registration required]


  • Institutional Asset Manager (21/04/2015)
    ERI Scientific Beta adds High Profitability and Low Investment smart factor “quality” indices to range
    "(...) ERI Scientific Beta has launched two new families of smart "quality-type" factor indices – High Profitability and Low Investment, allowing investors to benefit from well-documented additional risk premia. These new smart factor indices have been available on the www.scientificbeta.com platform since 20 March, 2015. The role of these separate factors relating to firm characteristics has been documented in recent empirical studies. ERI Scientific Beta’s High Profitability and Low Investment factors rely on straightforward and parsimonious indicators, and provide more robust performance benefits than ad-hoc stock picking indicators of “quality” currently used in the industry. (...)"
    Copyright GFM Limited [Full text]


  • Investment Europe (21/04/2015)
    ERI Scientific Beta launches two indices
    "(...) “By proposing not one but two smart factor quality indices, ERI Scientific Beta is allowing investors to gain exposure to two very different, and therefore highly decorrelated, factors that represent two dimensions of the quality approach. “This dissociation is in contrast with grey indices constructed through multi-criteria approaches that are not consistent with academic research in the area of quality. “The performance of factor-tilted indices is improved by the use of the diversified multi-strategy scheme offered by Scientific Beta,” the company said. Over the very long term (1974-2014), these smart factors have outperformed their corresponding cap-weighted indices by an average annual rate of 3.61% for the US market. (...)"
    Copyright Open Door Media Publishing Limited [Full text]


  • Financial Investigator (21/04/2015)
    ERI Scientific Beta adds families of High Profitability and Low Investment smart factor “quality” indices to its range
    "(...) ERI Scientific Beta, the smart beta index provider set up in 2013 by EDHEC-Risk Institute, has announced the addition of two families of smart "quality-type" factor indices: High Profitability and Low Investment, allowing investors to benefit from well-documented additional risk premia. These new smart factor indices have been available on the www.scientificbeta.com platform since March 20, 2015. The role of these separate factors relating to firm characteristics has been documented in recent empirical studies. ERI Scientific Beta’s High Profitability and Low Investment factors rely on straightforward and parsimonious indicators, and provide more robust performance benefits than ad-hoc stock picking indicators of “quality” currently used in the industry. (...)"
    Copyright Financial Investigator Publishers [Full text]


  • Global Investor (21/04/2015)
    ERI Scientific Beta adds to range of quality factors
    "(...) ERI Scientific Beta has added two families of quality-type factors to its range of smart beta indices which target additional risk premia, the high profitability and low investment families. The firm says it aims to give investors access to a more systematised and robust way of approaching qualitative stock picking than the ad-hoc indicators of quality factors currently used in the industry. Over 40 years to 2014, these smart factors have outperformed their corresponding cap-weighted indices by an average annual rate of 3.61% for the US market. ERI Scientific Beta hopes by proposing two smart factor quality indices investors will be able to gain exposure to two very different, and therefore highly decorrelated, factors that represent two dimensions of the quality approach. (...)"
    Copyright Euromoney Institutional Investor PLC [Full text]


  • Benefits and Pensions Monitor (20/04/2015)
    Geographic Exposure Fails To Match
    "(...) An EDHEC-Risk Institute publication underlines the usefulness of analysing the performance and risks of portfolios, by taking into account their geographic equity exposure based on real economic activity and not only on their place of listing or, more generally, the nationality assigned to them in market indices. ‘Accounting for Geographic Exposure in Performance and Risk Reporting for Equity Portfolios’ finds that, for a number of stocks, their official nationality does not match their real economic exposure as represented by the company’s distribution of sales. A dominant practice in the search for international diversification of equity portfolios is to classify stocks according to their place of listing, incorporation, or headquarters. However, such a practice is questionable within the context of a globalized marketplace where a company's operations are typically not restricted to any single country. It clearly shows that, in developed market indices, the percentage of company sales generated outside the official region of the index is significant and has increased in recent years. (...)"
    Copyright Benefits and Pensions Monitor [Full text]


  • Investment Europe (20/04/2015)
    Capitalising on ageing
    "(...) The ageing theme was one of the topics highlighted at the EDHEC-Risk Days conference in London recently. (...) People are living longer. This trend remains inexorable. So, how to benefit from ageing? The theme was discussed by Vafa Ahmadi (pictured), head of Thematics Equities at CPR Asset Management and fund manager of CPR Silver Age, at the EDHEC-Risk Days conference, which took place in London recently. (...)"
    Copyright Open Door Media Publishing Limited [Full text]


  • Funds Europe (17/04/2015)
    Professor Noël Amenc resigns as director of EDHEC-Risk Institute
    "(…) The EDHEC-Risk Institute has announced that Professor Noël Amenc is to resign from his role as director, in order to focus on the strong growth in the activities of ERI Scientific Beta. Amenc will continue to head up ERI Scientific Beta, the smart beta index provider set up by the EDHEC Risk Institute in 2012, which is set to become an autonomous entity. Amenc founded the EDHEC-Risk Institute in 2001 and worked to make the institute, which is part of EDHEC Business School, one of the leading centres for applied research for the investment industry. (...)"
    Copyright Funds Europe [Full text - Registration required]


  • HedgeWeek (16/04/2015)
    SciBeta Developed Low Liquidity Diversified Multi-Strategy is top performing ERI Scientific Beta smart beta index in March
    "(...) The SciBeta Developed Low Liquidity Diversified Multi-Strategy index, with a relative return of 1.10 per cent compared to the broad cap-weighted index, was the top performing ERI Scientific Beta smart beta index in March. The SciBeta Developed High Liquidity Diversified Multi-Strategy index posted the lowest relative return (0.03 per cent). Performance for smart factor indices exposed to risk factors known to be well rewarded over long periods remains strong, with annual performance in excess of broad cap-weighted indices ranging from 1.03 per cent to 3.11 per cent since inception for the Developed universe. Scientific Beta Multi-Beta Multi-Strategy (MBMS) indices associate an effective choice of weighting scheme, in terms of diversification, with an allocation to well-rewarded smart factors, to prevent indices from being too concentrated in one factor and to reduce their specific risks. Over the past ten years, the SciBeta Developed Multi-Beta Multi-Strategy EW (Equal Weights) index and the SciBeta Developed Multi-Beta Multi-Strategy ERC (Equal Risk Contribution) index have posted strong annual relative returns of 1.93 per cent and 1.82 per cent, respectively, compared to cap-weighted indices. (...)"
    Copyright GFM Limited [Full text]


  • ETF.com (16/04/2015)
    Know The Geography Of Your Index
    "(...) Searching for more concrete answers, I was delighted to stumble across the EDHEC Risk Institute’s recent report on geographic exposure of indexes, published last month. (...) I knew the FTSE 100 had a strong chunk of earnings overseas, but I did not know it was less than half – and that’s 49 percent in Europe as a whole, not just in the UK. So much for main equity indexes acting as the bellwether for a country’s economy. Furthermore, this percentage has decreased significantly from 58 percent in 2003 as we live in an increasingly globalised world, as shown in the report. The same trend can be seen across the other indexes: for example, the S&P 500 used to have more than 80 percent of earnings derived in the U.S. in 2003, and that has decreased to 73 percent. (...) “It would be a shame if asset allocators compromised their asset allocation policy, which is often based on macroeconomic scenarios that use regional dimensions, through poor evaluation of the geographic reality of their portfolio or benchmark,” says EDHEC. I couldn’t sum it up better myself. (...)"
    Copyright ETF.com [Full text]


  • Actuarial Post (14/04/2015)
    Professor Noël Amenc steps down as director of EDHEC-Risk
    "(...) On the occasion of the EDHEC-Risk Days conference, which took place in London on March 24 and 25, 2015, Tomas Franzén, Chief Investment Strategist with the Swedish national pension fund AP2 and chairman of EDHEC-Risk Institute’s International Advisory Board, announced the resignation of Professor Noël Amenc from his role as Director of EDHEC-Risk Institute. Noël Amenc founded EDHEC-Risk Institute in 2001 and enabled the institute, which is part of EDHEC Business School, to become one of the leading centres for applied research for the investment industry worldwide, with a presence not only in Nice, France, but also in London and Singapore, and research and executive education partnerships with CFA Institute, Yale School of Management and Princeton University. (...)"
    Copyright Actuarial Post [Full text]


  • Institutional Asset Manager (14/04/2015)
    Professor Noël Amenc steps down as Director of EDHEC-Risk Institute
    "(...) Amenc founded EDHEC-Risk Institute in 2001 and enabled the institute, which is part of EDHEC Business School, to become one of the leading centres for applied research for the investment industry worldwide, with a presence not only in Nice, France, but also in London and Singapore, and research and executive education partnerships with CFA Institute, Yale School of Management and Princeton University. Amenc’s resignation is effective as of 1 August, 2015. At that date, Professor Lionel Martellini, who has been fulfilling the role of Scientific Director at EDHEC-Risk Institute, will succeed him as Director. Amenc will continue to head up ERI Scientific Beta, the smart beta index provider set up by EDHEC-Risk Institute at the end of 2012, which becomes an entity that is autonomous from the institute. (...)"
    Copyright GFM Limited [Full text]


  • Asset Servicing Times (08/04/2015)
    Drive for ‘real’ geographic stock assessment
    "(...) CACEIS and EDHEC-Risk Institute have proposed an alternative approach to assessing the risks and performance of a portfolio, based on the actual geographic exposure of stocks. In a new publication titled Accounting for Geographic Exposure in Performance and Risk Reporting for Equity Portfolios, the institute stated that analysis of portfolios should be based on ‘real’ economic activity and not only on the place of listing or nationality assigned in market indices. The study found that in many cases, a stock’s official nationality will no match its actual geographic and economic exposure with regards to the company’s distribution of sales. It therefore questioned the practice of classifying stocks in this way, as within the context of a global marketplace, a company’s operations are generally not restricted to a single country. According to the study, in the majority of developed market indices the percentage of company sales generated outside of the official region of the index is significant, and has been on the increase for a number of years. For example, for the STOXX Europe 600, the index is predominantly non-European, and this change in exposure is likely to influence variations in the index performance. There should be a clear distinction between those stocks that are actually exposed to the nationality of their index and those that are not, in order to compare performances, the study said. (...)"
    Copyright Asset Servicing Times [Full text]


  • Institutional Asset Manager (07/04/2015)
    EDHEC-Risk Institute proposes a different reporting approach to better assess portfolio risk and performance
    "(...) In this study, EDHEC-Risk Institute ultimately shows that the assessment of the geographic exposure and diversification of portfolios presents an incorrect view when simply using measures such as a stock’s place of listing, place of incorporation or, more generally, the nationality of the indices it belongs to. Consequently, it may transpire that the geographical diversification of equity portfolios, based on such incorrect assessments of economic exposure, turns out to be vastly sub-optimal. In this perspective, this EDHEC-Risk Institute initiative, supported by CACEIS, allows investors to take account of the real geographic risks of their portfolios when making strategic or tactical asset allocation decisions. It would indeed be disappointing for asset managers to compromise their asset allocation policy by poorly evaluating the geographic reality of their portfolio or benchmark. (...)"
    Copyright GFM Limited [Full text]


  • Funds Global Asia (07/04/2015)
    EDHEC makes Asia-Pacific smart beta appointment
    "(...) The EDHEC-Risk Institute has tasked Frédéric Ducoulombier with the role of business development director Asia ex-Japan and the Middle East for its smart index division, ERI Scientific Beta, which is based in Singapore. Ducoulombier is also corporate director of ERI Scientific Beta and a member of the division's executive committee. Paul Hoff will remain as business development director for Japan, leading ERI Scientific Beta's Tokyo office. Established in 2011, the EDHEC-Risk Institute is a research faculty of the EDHEC Business School in France, with campuses in Singapore, London, Boston, Nice and Paris. The institute set up ERI Scientific Beta in 2013 to promote its smart beta indices, which offer alternatives to conventional indices that are weighted by market capitalisation. (...)"
    Copyright funds global asia [Full text]


  • aiCIO (07/04/2015)
    Is Geography the Next Smart Beta?
    "(...) The geographical reach of listed companies is a more important driver of index returns than ever before, according to research by the EDHEC-Risk Institute. The findings were published in a paper titled “Accounting for Geographic Exposure in Performance and Risk Reporting for Equity Portfolios”, written by Noël Amenc, Felix Goltz, and Jan-Philip Schade from EDHEC-Risk, and Nicolas Gonzalez and Kumar Gautam from ERI Scientific Beta. The overseas exposure of the S&P 500, STOXX Europe 600, and FTSE Developed Asia Pacific indices were analysed by the authors to ascertain what type of companies drove performance in different periods. Between 2003 and 2013, the report found that the S&P 500’s exposure to regions outside the Americas grew from 19% to 27%. For the STOXX Europe 600, exposure to non-European regions grew from 36% to 45%. “These economic exposures ultimately have an influence on variations in the performance of the index,” the authors wrote. “As such, we find that the contribution to the performance of developed market indices of stocks with varied geographic exposure (either emerging market or local market exposure) differs noticeably.” (...)"
    Copyright Asset International [Full text]


  • International Securities Services Magazine (07/04/2015)
    The usefulness of performance and risk analysis
    "(...) It shows that, in developed market indices, the percentage of company sales generated outside the official region of the index is significant and has increased in recent years. For example, the cap-weighted non-US exposure of the S&P 500 and the non-European exposure of the STOXX Europe 600 between June 2004 and June 2013 increased from 30 percent to 39 percent and from 41 percent to 53 percent, respectively. This indicates, for the STOXX Europe 600 for example, this indicates that the index is predominantly non-European. These real economic exposures essentially influence variations in index performance. A clear separation between stocks actually exposed to the nationality of the index and those that are not allows us to distinguish the real differences in performance between these groups, naturally with conditional performance that is more or less pronounced vis-à-vis the market that they officially supposed represent or, conversely, the market that matches their real geographical exposure. In this study, EDHEC-Risk Institute ultimately shows that the assessment of the geographic exposure and diversification of portfolios presents an incorrect view when simply using measures such as a stock’s place of listing, place of incorporation or, more generally, the nationality of the indices it belongs to. (...)"
    Copyright Capital Markets Media Ltd. [Full text]


  • Automated Trader (07/04/2015)
    EDHEC-Risk publishes "Accounting for Geographic Exposure in Performance and Risk Reporting for Equity Portfolios"
    "(...) In a new publication entitled "Accounting for Geographic Exposure in Performance and Risk Reporting for Equity Portfolios", EDHEC-Risk Institute underlines the usefulness of analysing the performance and risks of portfolios, by taking into account their geographic equity exposure based on real economic activity and not only on their place of listing or, more generally, the nationality assigned to them in market indices. This research was conducted with the support of CACEIS as part of EDHEC-Risk Institute's research chair on "New Frontiers in Risk Assessment and Performance Reporting". This study finds that, for a number of stocks, their official nationality does not match their real economic exposure as represented by the company's distribution of sales. A dominant practice in the search for international diversification of equity portfolios is to classify stocks according to their place of listing, incorporation or headquarters. However, such a practice is questionable within the context of a globalised marketplace where a company's operations are typically not restricted to any single country. (...)"
    Copyright Automated Trader Limited [Full text]


  • Financial News (06/04/2015)
    Unmasked: the geographical distortion of benchmarks
    Article by Felix Goltz, Head of Applied Research, EDHEC-Risk Institute
    "(...) In research published this week, we have analysed the usefulness of a company’s reported geographic sales segmentation data in performance reporting. We have found that the designated nationalities of several companies do not come close to matching their real economic exposure, represented by the company’s distribution of sales. Many of the world’s leading indices have high weightings in markets outside their geographic designation. And this trend is increasing steadily. The issue has numerous implications, involving performance attribution and risk measurement. Strategic and tactical asset allocations are being influenced by benchmarks that are fundamentally flawed. (...)"
    Copyright Financial News [Full text - Registration required]


  • Exchange-Traded Funds (02/04/2015)
    In new research, EDHEC-Risk Institute proposes a comprehensive framework to measure performance in privately-held infrastructure equity investments
    "(...) A new paper entitled "The Valuation of Privately-Held Infrastructure Equity Investments," drawn from the Meridiam and Campbell Lutyens research chair at EDHEC-Risk Institute on "Infrastructure Equity Investment Management and Benchmarking," contributes a rigorous valuation framework to the debate on the benchmarking of privately-held infrastructure equity investments. The study also proposes a parsimonious data collection template, which can be used on an industry-wide basis to improve existing knowledge of the performance of privately-held infrastructure equity investments on an ongoing basis. (...)"
    Copyright exchangetradedfunds.com [Full text]


  • Institutional Asset Manager (02/04/2015)
    ERI Scientific Beta re-organises Asia-Pacific activities
    "(...) Frédéric Ducoulombier becomes Business Development Director Asia ex-Japan and the Middle East. Ducoulombier is a member of the ERI Scientific Beta Executive Committee and Corporate Director of ERI Scientific Beta, the head office of which is located in Singapore. Paul Hoff remains Business Development Director for Japan and is responsible for ERI Scientific Beta’s Tokyo office. Ducoulombier is directly responsible for compliance, governance and transparency at ERI Scientific Beta. Frédéric Ducoulombier has spent much of his career at EDHEC and more particularly at EDHEC-Risk Institute, where he was in charge of EDHEC-Risk Executive Education and then EDHEC-Risk Institute–Asia. Hoff is a long time resident of Japan and has held positions in the Asian finance industry since 1982. He spent much of his career with the HSBC Japan operations and headed the Asia-Pacific operations of the London Stock Exchange’s index subsidiary. (...)"
    Copyright GFM Limited [Full text]


  • Financial Investigator (02/04/2015)
    ERI Scientific Beta announces new organisation of its Asia-Pacific activities
    "(...) ERI Scientific Beta, the smart beta index provider set up in 2013 by EDHEC-Risk Institute, the leading international risk and asset management research centre, has announced a new organisation for its Asia-Pacific activities. Frédéric Ducoulombier becomes Business Development Director Asia ex-Japan and the Middle East. Frédéric Ducoulombier is a member of the ERI Scientific Beta Executive Committee and Corporate Director of ERI Scientific Beta, the head office of which is located in Singapore. Paul Hoff remains Business Development Director for Japan and is responsible for ERI Scientific Beta’s Tokyo office. (...)"
    Copyright Financial Investigator Publishers [Full text]


  • Automated Trader (02/04/2015)
    Debate on benchmarking infrastructure equity investment moves forward
    "(...) A new paper entitled "The Valuation of Privately-Held Infrastructure Equity Investments," drawn from the Meridiam and Campbell Lutyens research chair at EDHEC-Risk Institute on "Infrastructure Equity Investment Management and Benchmarking," contributes a rigorous valuation framework to the debate on the benchmarking of privately-held infrastructure equity investments. The study also proposes a parsimonious data collection template, which can be used on an industry-wide basis to improve existing knowledge of the performance of privately-held infrastructure equity investments on an ongoing basis. EDHEC-Risk Institute review existing approaches developed to value private equity investments and conclude that they are inadequate for the purpose of valuing unlisted infrastructure project equity. Such methods either require observing more data than is possible for long-term infrastructure projects, or consists of internal rate of return (IRR) computation that fail to answer investors and regulators questions about expected risk-adjusted performance. (...)"
    Copyright Automated Trader Limited [Full text]


  • Automated Trader (01/04/2015)
    Sound Bytes: views from the conference circuit
    "(...) Event: EDHEC-Risk Days Europe
    Presentation on preliminary research showing a strong theoretical argument in favour of factor investing (aka alternative risk premia or smart beta) under specific conditions, namely if the benchmarks being used are replicating portfolios for asset pricing factors - where the price of any payoff is given by the expectation of the product of the payoff with respect to a stochastic discount factor. (...)
    "Diversification is not meant to help us cope with 2008-type events. We have other technologies for that - we have hedging, we have insurance…Diversification is simply meant to help us harvest risk premia in the most efficient way, by precisely diversifying away from our portfolios any kind of risk which is not rewarded." - Lionel Martinelli, professor of finance, EDHEC Business School and scientific director, EDHEC-Risk Institute.
    "(Results show that) all allocation schemes do better than market cap weighting. I think that is a profound lesson and probably many of us (portfolio managers) are still very much bound to be market-cap allocation type paradigm. I think we really should challenge that." - Jaap van Dam, managing director, Investment Strategy, PGGM.
    (...)"
    Copyright Automated Trader Limited [Full text]


March 2015

  • Funds Europe (March 2015)
    EDHEC RESEARCH: A better balancing act
    "(…) Recent research at EDHEC-Risk Institute, backed by Ontario Teachers’ Pension Plan, assesses whether LDI solutions can be enhanced by the design of performance-seeking equity benchmarks with improved liability-hedging properties. We confirm this intuition and show that improving hedging characteristics of the performance portfolio generates welfare gains unless this improvement comes at an exceedingly large opportunity cost in terms of performance, a result that we call the fund interaction theorem. While two competing effects exist in principle (a better alignment of the equity portfolio with the liabilities leads to a higher allocation to equities for the same ALM risk budget due to enhanced liability-friendliness, but it may also lead to a lower reward per dollar invested compared to a pure focus on performance), our empirical analysis actually suggests that the selection of stocks with above-average liability-hedging properties leads to both a higher degree of liability-friendliness (as expected) and also to better performance due to increased exposure to rewarded factor tilts. (...)"
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  • Benefits and Pensions Monitor (30/03/2015)
    Satisfaction With ETFs At High Levels
    "(...) Satisfaction has remained at high levels especially for traditional ETF asset classes. However, there have been increases in satisfaction for corporate bond, government bond, and equity ETFs, says the EDHEC ‘European ETF Survey 2014.’ As well, satisfaction rates for ETFs based on the most liquid ETF asset classes are far more consistent compared to those based on illiquid asset classes. The survey also found ETF investors plan to further increase their use of these products and data shows growing appetite to rely on ETFs for ever more aspects of portfolio management. ETFs which until now frequently represented portfolio reallocation tools or the realization of tactical bets are becoming candidates for core investment strategies. Among the biggest priorities seen by investors for future product development in the ETF space, four concern indices relating to smart beta approaches, namely smart beta equity, equity factor, equity style, and smart beta bond. About a quarter of respondents already use products tracking ‘smart beta’ indices. (...)"
    Copyright Benefits and Pensions Monitor [Full text]


  • Funds Europe (26/03/2015)
    Fees drive investors to ETFs
    "(…) Investors are turning to exchange-traded funds (ETFs) as a substitute for actively managed funds to cut their costs, says research from the EDHEC Risk Institute. A majority, 64%, of the 222 investors polled said they were increasing their use of ETFs as an alternative to active managers, while 42% were boosting ETF usage in place of other index products. The EDHEC European ETF Survey 2014 found these changes were primarily motivated by cost, with 70% saying this was the factor driving them towards ETFs over other options. Performance was the second most significant factor, with 45% of respondents citing this as an incentive. Liquidity and transparency were also influential criteria. Among the respondents that were using ETFs as a substitute for active managers, the research found 27% investing in products tracking smart beta, while 40% were considering investing in these products in the near future. (...)"
    Copyright Funds Europe [Full text - Registration required]


  • ETF Express (25/03/2015)
    EDHEC European ETF survey finds high levels of satisfaction with ETFs
    "(...) The EDHEC-Risk Institute has announced the results of the EDHEC European ETF Survey 2014, a survey of 222 European ETF investors. The survey was conducted as part of the Amundi ETF & Indexing research chair at EDHEC-Risk Institute on “Core-Satellite and ETF Investment.” Key findings from the 2014 survey revealed that satisfaction has remained at high levels especially for traditional asset classes, with a rate higher or equal to 90 per cent. There have also been increases in satisfaction for corporate bond, government bond and equity ETFs but satisfaction rates for ETFs based on the most liquid ETF asset classes are far more consistent compared to those based on illiquid asset classes. ETF investors plan to further increase their use of ETFs and data shows growing appetite to rely on ETFs for ever more aspects of portfolio management. ETFs which until now frequently represented portfolio reallocation tools or the realisation of tactical bets are becoming candidates for core investment strategies.(...)"
    Copyright GFM Limited [Full text]


  • aiCIO (25/03/2015)
    The Faltering Case for Active ETFs
    "(...) Investors overwhelmingly prefer passive exchange-traded funds (ETFs) to their active counterparts, a survey has shown, despite many asset managers latching on to this new option. Just 6% of respondents to EDHEC-Risk Institute’s annual survey—conducted with Amundi Asset Management—said they preferred active ETFs to passive vehicles. In contrast, 70% preferred passive vehicles with just 22% having no preference. The lack of enthusiasm for these new products may be caused by a dilemma that is inherent to their nature, the survey said. “Active ETFs are supposed to have some of the advantages of ETFs, such as transparency, tax efficiency, and liquidity, all while being actively managed,” the report stated. “However, since managers are paid for their stock selection, frequent disclosure of the underlying stock holdings would encourage other investors to buy the underlying securities on their own instead of trading ETFs. On the other hand, if transparency is low, the price of ETFs would suffer significant deviation from the net asset value of the underlying holdings.” (...)"
    Copyright Asset International [Full text]


  • IPE (24/03/2015)
    Noël Amenc resigns as director at EDHEC-Risk Institute
    "(…) Noël Amenc has announced his resignation as director of EDHEC-Risk Institute. He will be replaced by Lionel Martellini, the current scientific director of the institute. Amenc, who is also a professor at EDHEC Business School, has led the EDHEC-Risk Institute since 2001, overseeing its expansion and efforts to become a leader in financial research, particularly smart beta. He has now resigned to focus on his role as chief executive at ERI Scientific Beta, the institute’s initiative to put its research on smart beta into practice. (…)"
    Copyright IPE [Full text - Registration required]


  • Investment Europe (24/03/2015)
    ETFs use set to increase, EDHEC-Risk survey says
    "(...) There is room for growth in the use of the ETF products by European asset managers in the near future. That is the main conclusion of an annual survey on European ETF conducted by the Nice-based EDHEC-Risk institute between October and November 2014. The results of the 2014 survey have been presented by Felix Goltz, head of Applied Research at EDHEC-Risk institute, during the opening session of the EDHEC-Risk Days Europe conference in London. A total of 222 responses of European ETF users, coming from 27 countries and representing €3,350bn of AUM, has been recorded. Almost half (47%) of the respondents were based in the UK, Switzerland and France. Among the trends it highlights, the survey points out that around 60% of the ETF users have plans for increasing ETF use. This figure tends to be a stable trend since 2011. In 2014, almost 40% of respondents will maintain their level of usage of ETFs. Only 3% of the surveyed asset managers said they would decrease their use. (...)"
    Copyright Open Door Media Publishing Limited [Full text]


  • Financial News (23/03/2015)
    Survey pours cold water on managers’ active ETF plan
    "(...) A survey of just under 200 institutional investors by French business school EDHEC-Risk Institute found that only 16% of respondents wanted ETFs to evolve to become actively managed. Some 79% of respondents said that ETFs should remain products that track indexes. (...) However, the survey reported that development of active ETFs featured at the bottom of an ETF wish list. Advances in equity emerging market, smart beta and factor ETFs, which track indexes that are not weighted by market capitalisation, featured significantly more highly for institutional investors. (...)"
    Copyright Financial News [Full text - Registration required]


  • ETF.com (23/03/2015)
    Daily ETF Watch: Global X To Do Smart Beta
    "(...) Global X has filed for five ETFs tied to indexes created by EDHEC Risk Institute’s Asia arm. The underlying “Scientific Beta” indexes take a multifactor approach and also use multiple weighting methodologies. These will not be the first ETFs in the U.S. to track EDHEC’s Scientific Beta indexes, however. Earlier this year, ETF Securities launched the ETFS Diversified-Factor U.S. Large Cap ETF (SBUS) and the ETFS Diversified-Factor Developed Europe ETF (SBEU). (...) EDHEC Scientific Beta won the Best Index Provider Website award at this year’s ETF.com awards. Its informative website contains exhaustive information about its indexes and their underlying methodologies. Moreover, the access to returns series, constituent lists, identifiers and other data are all completely free. That raises interesting issues around investor education and transparency. For example, while many ETF providers go to great lengths to provide investors with extensive data on their funds, the index provider is an independent third party. (...)"
    Copyright ETF.com [Full text]


  • HedgeWeek (16/03/2015)
    SciBeta Developed High Volatility Diversified Multi-Strategy index returns 0.99% in Feb
    "(...) The best performing ERI Scientific smart factor index in February was the SciBeta Developed High Volatility Diversified Multi-Strategy index, with a relative return of 0.99% compared to the broad cap-weighted index. The SciBeta Developed Low Volatility Diversified Multi-Strategy index posted the lowest relative return (-1.79%). Performance for smart factor indices exposed to risk factors known to be well rewarded over long periods remains strong with annual performance in excess of broad cap-weighted indices ranging from 1.41% to 2.63% since inception for the Developed universe. Scientific Beta Multi-Beta Multi-Strategy (MBMS) indices associate an effective choice of weighting scheme, in terms of diversification, with the choice of smart factor, to prevent indices from being too concentrated and to reduce their specific risks. Over the past ten years, the SciBeta Developed Multi-Beta Multi-Strategy EW (Equal Weights) index and the SciBeta Developed Multi-Beta Multi-Strategy ERC (Equal Risk Contribution) index post strong annual relative returns of 1.94% and 1.84%, respectively, compared to cap-weighted indices. (...)"
    Copyright GFM Limited [Full text]


  • FTfm (09/03/2015)
    Row erupts as EU backtracks on index data transparency
    "(...) In an open letter to Roberto Gualtieri, chair of the European parliament’s economic and monetary affairs committee, Noël Amenc, professor of finance at France’s EDHEC Business School, said: “We would have thought that, in a concern for better investor protection, your parliament would have strengthened transparency requirements rather than weakening them. If this provision is adopted it would constitute a step backwards.” (...) For his part, Prof Amenc dismisses the notion that transparency would undermine the ability of index providers’ to protect and enforce their intellectual property rights. He argues that the existing legal and contractual tools, such as licences, at their disposal mean they can defend themselves against unauthorised use of their methodologies and data. Moreover, the danger of freeriding and front-running can be combated by releasing the data with a time lag. EDHEC’s concerns centre on so-called “strategy indices”, such as those classed in modern-day parlance as “smart beta”. (...)"
    Copyright Financial Times Fund Management [Full text]


  • Pensions & Investments (09/03/2015)
    Fabozzi snags Vertin Award
    "(...) Frank J. Fabozzi received the CFA Institute Research Foundation's James R. Vertin Award, recognizing individuals whose research is “notable for its relevance and enduring value to investment professionals,” said a joint news release from the foundation and the EDHEC-Risk Institute, where Mr. Fabozzi is a member and finance professor. Along with his work at EDHEC, Mr. Fabozzi is an editor of The Journal of Portfolio Management and holds associate editor or advisory board positions at several other journals. (...)"
    Copyright Pensions & Investments [Full text - Registration required]


  • Asia Asset Management (March 2015)
    Improving the liability-hedging benefits of equity portfolios
    Article by Guillaume Coqueret, Romain Deguest, Lionel Martellini, and Vincent Milhau
    "(…) The fund separation theorem, which is a fundamental cornerstone of dynamic asset pricing theory, suggests that risk and performance are two conflicting objectives that are best managed when managed separately within two dedicated building blocks. In an asset-only context, it implies that all investors should allocate some fraction of their wealth to the risk-free asset and the remainder to the optimal risky portfolio (that is the maximum Sharpe ratio) (Tobin (1958)). In an asset-liability management (ALM) context (e.g. a pension plan facing liability commitments), the fund separation theorem translates into liability-driven investing (LDI in short), a disciplined investment framework that advocates splitting an investor’s wealth between a dedicated liability-hedging portfolio (LHP) and a common performance-seeking portfolio (PSP) (see Martellini (2006) or Martellini and Milhau (2012)). (In an ALM context, cash is also used as an additional building block, which allows, for example, the use of leveraged LDI strategies.) (…)"
    Copyright Asia Asset Management [Full text - Registration required]


  • Benefits and Pensions Monitor (03/03/2015)
    Transparency Obligations Removed
    "(...) The EDHEC-Risk Institute is concerned about draft text which plans to remove all obligations of transparency from the initial project for regulation of indices used as benchmarks. If this provision is adopted, it says this would constitute a step backwards compared to the texts currently in place, which organize the transparency of the investment industry. With the development of passive investment, notably in the pension fund world, the institute does not understand why the commission wishes to promote a text that falls far short of ESMA’s transparency requirements for financial indices used in UCITS. In a concern for better investor protection, it says it would have thought the parliament would have strengthened transparency requirements rather than weakening them and, ultimately, limiting them to UCITS funds alone, which only represent a portion of European savings. (...)"
    Copyright Benefits and Pensions Monitor [Full text]


  • IPE (March 2015)
    Smart beta multi-factor portfolio construction: The tracking error factor
    Article by Felix Goltz, head of applied research at the EDHEC-Risk Institute and research director at ERI Scientific Beta
    "(…) Many investors are seeking to improve the performance of their equity portfolios by capturing exposure to rewarded factors. However, factor-tilted portfolios may expose investors to substantial relative risk – deviations from cap-weighted reference indices which might result in underperformance over any given short time horizon, despite the long-term potential for outperformance provided by the factor tilts. (...) In this article, we present two risk-allocation approaches that may be suitable for enhancing performance with limited relative risk. (…)"
    Copyright IPE [Full text - Registration required]


February 2015

  • ETF.com (25/02/2015)
    Finding Robust Smart Beta Solutions
    "(...) The EDHEC Risk Institute (ERI) is an academic institution focusing on applied research for the investment industry and is widely followed among large institutions; in particular, pension funds and endowments. In 2012, ERI Scientific Beta was created with the objective of bringing scientific rigor to smart-beta indexes. Their solutions aim at addressing the potential issues of market-cap-weighted indexs by distinguishing factor exposures and weighting strategies. ETF Securities is the first provider in the U.S. market to offer products tracking indexes from ERI Scientific Beta: ETFS Diversified-Factor U.S. Large Cap Index Fund (SBUS), ETFS Diversified-Factor Developed Europe Index Fund (SBEU). These ETFs seek to provide broad market exposure by combining the four current well-established previously disclosed factors, while the weighting strategies aim to maximize the exposure with a goal of improving overall risk adjusted performance. (...)"
    Copyright ETF.com [Full text]


  • Funds Europe (February 2015)
    EDHEC Research: 8 steps for creating infrastructure benchmarks
    "(…) The international policy agenda is heavily focused on matching demand and supply for long-term capital investment in infrastructure. Frédéric Blanc-Brude of the EDHEC Risk Institute-Asia explains the need for benchmarks and how to create them. The recent G20 focus on long-term investment in infrastructure coincides with the steadily growing appetite from institutional investors for unlisted and illiquid assets. Solid evidence supporting the infrastructure investment narrative is still missing, however, and fully fledged investment solutions demonstrating the benefits of infrastructure investment for institutional investors remain elusive. Today, documenting the investment characteristics of long-term investment in infrastructure has become a pressing question. In a recent research paper (Benchmarking Long-Term Investment in Infrastructure: Objectives, Roadmap and Recent Progress), we discuss the need and propose an approach to benchmark long-term investments in infrastructure, where long-term investment simply refers to any unlisted and illiquid asset. (...)"
    Copyright Funds Europe [Full text - Registration required]


  • Pensions & Investments (25/02/2015)
    Frank Fabozzi honored by CFA Institute Research Foundation award
    "(...) Frank J. Fabozzi received the CFA Institute Research Foundation's James R. Vertin Award, recognizing individuals whose research is “notable for its relevance and enduring value to investment professionals,” said a joint news release from the foundation and the EDHEC-Risk Institute, where Mr. Fabozzi is a member and finance professor. Along with his work at EDHEC, Mr. Fabozzi is an editor of The Journal of Portfolio Management and holds associate editor or advisory board positions at several other journals. He is a visiting fellow at Princeton University's Department of Operations Research and Financial Engineering. (...)"
    Copyright Pensions & Investments [Full text - Registration required]


  • Option Finance (25/02/2015)  
    "Se focaliser sur un facteur de risques peut faire oublier la volonté d’une meilleure diversification"
    "(…) La rédaction de Funds Magazine a interrogé Félix Goltz, directeur de la recherche appliquée au sein de l’EDHEC Risk-Institute. Il nous explique les raisons de l'engouement des investisseurs pour les ETF Smart Beta. (...)
    Les fournisseurs d’ETF smart beta proposent également aujourd’hui des ETF basés sur la détermination de facteurs de risques, pourquoi ?
    Félix Goltz :
    Depuis la consécration des travaux sur l’efficience des marchés de l’américain Eugène Fama, qui a reçu le prix Nobel d’économie en 2013, les professionnels de la finance ont repris très largement son concept de facteurs de risque sur les marchés. De manière assez consensuelle, ils ont retenu quatre à cinq facteurs de risque (value, taille, momentum, qualité et faible risque) qui peuvent expliquer la superformance d’un marché actions.
    (…)"
    Copyright Option Finance [Full text]


  • Markets Media Magazine (23/02/2015)
    U.S. ETF Issuers Target Europe
    "(...) Detlef Glow, head of EMEA research at Lipper, the fund research provider does not believe that US issuers have a competitive advantage when entering Europe as they cannot just convert US funds, but need to set up a new business and new funds. “US issuers need to ask where they can add value,” Glow added. “There are already thousands of funds listed on European exchanges and the vanilla equity and debt space is already crowded.” Glow said European issuers can compete by developing innovative products. He gave the example of the partnership between EDHEC-Risk Institute and ETF provider Amundi to create smart beta passive products for the institutional market. (...)"
    Copyright Markets Media [Full text]


  • L'Agefi Suisse (13/02/2015)  
    ERI Scientific Beta: performances janvier
    "(...) Le SciBeta Developed Low Volatility Diversified Multi-Strategy et le SciBeta Developed High Momentum Diversified Multi-Strategy Index ont enregistré les meilleures performances le mois dernier parmi les indices smart factor, avec une performance relative de 1,66% pour les deux indices par rapport aux indices capi-pondérés. (...) Les surperformances à long terme des indices SciBeta se confirment, avec des excess return de 1,34% à 2,84% par rapport aux principales références pondérées selon la capitalisation boursière, pour les titres de l’univers des marchés développés. Pour deux facteurs (Momentum et Value) sur un total de quatre, les indices multifactoriels SciBeta enregistrent la plus forte performance relative au cours du mois dernier. (...)"
    Copyright L'Agefi Suisse [Full text - French - Registration required]


  • HedgeWeek (13/02/2015)
    ERI Scientific Beta announces Jan performance of smart beta indices
    "(...) ERI Scientific Beta has published the monthly performance report for January 2015 for the ERI Scientific smart beta indices. The best performing of the smart factor indices for the month are the SciBeta Developed Low Volatility Diversified Multi-Strategy index and the SciBeta Developed High Momentum Diversified Multi-Strategy index, both with a relative return of 1.66% compared to broad cap-weighted indices, while the SciBeta Developed High Volatility Diversified Multi-Strategy index posts the lowest relative return (0.08%). Performance for smart factor indices exposed to risk factors known to be well rewarded over long periods remains strong with annual performance in excess of broad cap-weighted indices ranging from 1.34% to 2.84% since inception for the Developed universe. (...)"
    Copyright GFM Limited [Full text]


  • Ignites Europe (10/02/2015)
    Amundi adds to smart beta ETF range
    "(...) Valérie Baudson, global head of ETFs and indexing at Amundi, says: “We are delighted to once again bring efficient innovation to the market.” (...) Amundi also rolled out a “multi smart beta” ETF, which tracks an equal risk contribution index created by ERI Scientific Beta, with which it agreed a strategic partnership last year. (...)"
    Copyright Ignites Europe (a Financial Times service) [Full text - Registration required]


  • L'Agefi Hebdo (05/02/2015)  
    Grands prix de l'innovation - Catégorie Action
    Amundi ETF global equity multi smart allocation scientific beta Ucits ETF
    "(…) Le Grand Prix de l'Innovation dans la catégorie Actions recompense Amundi pour son ETF Global Equity Multi Smart Allocation Scientific Beta Ucits ETF. (...) Le choix de l'indice découle d'un partenariat avec l'EDHEC Risk Institute. La méthodologie de construction de l'indice de stratégie vise à surperformer l'indice actions monde equivalent pondéré par la capitalisation boursière, en combinant quatre facteurs principaux : value, midcap, momentum et low volatility avec cinq strategies de diversification smart beta. Le jury a apprécié le choix d'un indice issu d'un travail académique, garant de rigueur scientifique et d'indépendance. (…)"
    Copyright Agefi Hebdo [Full text - Registration required]


  • InvestmentNews (03/02/2015)
    Fund managers warned on exotic ETFs
    "(...) Some recent studies have found that a number of strategies labeled smart beta fail to deliver on providing superior risk-adjusted returns to plain indexes. “By making smart beta out to be the new El Dorado as a cheaper form of alpha, smart beta providers are not serving either investors or themselves well, because they can create disappointment,” said Noël Amenc, a professor of finance at EDHEC Business School and director of an indexing business affiliated with the French university. (...)"
    Copyright Crain Communications Inc. [Full text]


  • ETF.com (03/02/2015)
    Daily ETF Watch: ETFS Adds To Equity Lineup
    "(...) ETF Securities expanded its budding lineup of equity-based ETFs last week with the launch of two more smart-beta ETFs on Jan. 28. (...) The two new funds use a complex multifactor approach rather than an approach based primarily on earnings; they also track indexes from the Scientific Beta arm of the EDHEC Risk Institute rather than Zacks Research, and cover the U.S. and European markets. The ETFS Diversified-Factor U.S. Large Cap Index Fund (SBUS) and ETFS Diversified Factor Developed Europe Index Fund (SBEU) are both tied to benchmarks comprising four different equally weighted factor indexes targeting high valuation, high momentum, low volatility and size, respectively, the prospectus said. (...) It’s safe to say there probably isn’t another smart-beta index methodology that matches the Scientific Beta diversified-factor approach in terms of complexity. ETF Securities noted in a press release that the index provider’s goal is to construct smart-beta approaches that reduce exposure to “non-performing market factors” and increase diversification, two of the main problems it sees in traditional, cap-weighted indexes. (...)"
    Copyright ETF.com [Full text]


  • L'Agefi Suisse (02/02/2015)  
    Stratégie smart beta axée sur risque/rendement
    "(...) L’indice smart beta SciBeta Developed HLiq Low-Volatility Efficient Maximum Sharpe Ratio (SciBeta Dev HLiq LVol) a enregistré en 2014 une performance de 12,49% (au 31 décembre). Sa référence SciBeta Dev Cap-Weighted Index affiche pour sa part un rendement de 4,83%. Sur trois ans, le SciBeta Dev HLiq LVol s’apprécie de plus de 45% contre moins de 35% pour son benchmark, ce dernier étant construit sur la base de la capitalisation boursière. Outre les facteurs de faible de volatilité et les contraintes minimales de liquidité, l’une des caractéristiques principales de cet indice «multi factor» réside dans le prise en compte du ratio de Sharpe pour la pondération de chaque membre de l’indice. Issu de la théorie moderne du portefeuille, le ratio de Sharpe mesure le différentiel de rendement des actifs lié à leur niveau de risque. Les asset managers s’y intéressent en vue de maximiser le couple rendement/risque de leurs investissements. Les spécialistes de l’ERI ScientificBeta (EDHEC-Risk Institute), en charge de la construction de l’indice, soulignent qu’une stratégie smart beta basée sur un ratio qui se focalise sur l’efficience de ce couple doit impérativement être très explicite sur la façon dont elle entend atteindre son objectif. (...)"
    Copyright L'Agefi Suisse [Full text - French - Registration required]


January 2015

  • L'Agefi Suisse (30/01/2015)  
    Scientific Beta (EDHEC-Risk): Multi-Beta Multi-Strategy YTD
    "(...) L’indice smart beta SciBeta Developed Multi-Beta Multi-Strategy ERC Index est en hausse de 1,20% depuis le début de l’année (au 27 janvier 2015), d’après les données de Scientific Beta (EDHEC-Risk Institute Venture). La référence à battre, l’indice Scientific Beta Global Developed Cap-weighted Index, enregistre pour sa part un rendement de 0,05% sur la période. L’indice smart beta s’est apprécié de 4,98% au cours des trois derniers mois contre 2,88% pour la référence pondérée selon la capitalisation. Entre le 28 janvier 2014 et le 27 janvier 2015, l’indice smart beta enregistre un rendement total de plus de 11% contre moins de 10% pour l’indice cap-weighted. (...)"
    Copyright L'Agefi Suisse [Full text - French - Registration required]


  • ETF Trends (29/01/2015)
    ETF Securities Expands Equity ETF Lineup With Two More New Funds
    "(...) ETF Securities, the London-based exchange traded funds issuer known primarily for its lineup of commodities funds, is again adding to its lineup of U.S.-listed equity-based offering with the debuts of the ETFS Diversified-Factor U.S. Large Cap Index Fund (NYSEArca: SBUS) and the ETFS Diversified-Factor Developed Europe Index Fund (NYSEArca: SBEU). ETF Securities is partnering with ERI Scientific Beta on the new ETFs. Scientific Beta is an index provider specializing in smart beta solutions and is part of the EDHEC Risk Institute, an entity that works closely with institutions to implement academic research and improve their investment and risk management process, according to a statement. Scientific Beta’s stock selection process includes emphasizing investment factors, such as volatility, valuation, momentum and size. (...)"
    Copyright Global Trends Investments [Full text]


  • ETF Express (29/01/2015)
    ETF Securities and Scientific Beta launch two Diversified-Factor Equity ETFs
    "(...) ETF Securities (ETFS) has launched two new Exchange Traded Funds (ETFs) based on Scientific Beta’s multi-factor, multi-strategy indices. The new ETFs are the ETFS Diversified-Factor US Large Cap Index Fund (SBUS) and the ETFS Diversified-Factor Developed Europe Index Fund (SBEU). Both products are listed on the New York Stock Exchange (NYSE). Scientific Beta is an index provider specialising in smart beta solutions and is part of the EDHEC Risk Institute, an entity that works closely with institutions to implement academic research and improve their investment and risk management process. Scientific Beta has developed smart beta solutions to address simultaneously the two primary issues of market cap weighted indices, i.e. exposure towards non-performing market factors and lack of diversification. This comprehensive approach differs from most of the other smart beta indices which focus on either one of the issues, and generally results in sub-optimal risk/return performances. Scientific Beta indices select stocks based on factors well documented by academic research (low volatility, valuation, momentum and size) and use a proprietary weighting strategy to enhance the diversification, with the objective of providing better risk adjusted performances than other established benchmarks such as the S&P 500 and Stoxx Europe 600. (...)"
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  • Les Echos (26/01/2015)  
    Les « hedge funds » victimes de la fin du plancher du franc suisse
    "(...) Seulement, au début d’une année charnière sur les marchés, les « hedge funds » auront de nombreuses occasions de remonter la pente ou au contraire de sombrer davantage. Les fonds « global macro » ont enregistré des sorties nettes de capitaux de près de 30 milliards de dollars en 2014 du fait de leurs faibles performances . Depuis 2012, le rendement annuel moyen d’un fonds « global macro » a en effet été de 3,5 %, selon les indices EDHEC-Risk Alternatives. (...)"
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  • L'Agefi (22/01/2015)  
    « Nous n'opposons pas les deux écoles »
    Entretien avec Catherine Vialonga, directeur des investissements et de l'ALM (asset and liability management) à l'Erafp
    "(…) Compte tenu de notre philosophie ISR et, pour certains gérants, de sa difficile mise en oeuvre, nous fournissons aux gestionnaires sélectionnés par appels d’offres des indices propriétaires « pré-filtrés » de certains risques. C’est ainsi que nous avons mis en place en 2009, avec le concours d’EDHEC Risk, le FTSE EDHEC-Risk ERAFP SRI Index. Le poids des actions sous-jacentes n’est pas déterminé par leur capitalisation, mais par leur couple rendement/risque, selon une optimisation de leur ratio de Sharpe. (…)"
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  • ETF Express (15/01/2015)
    Amundi ETF & Indexing enjoys another very successful year in 2014
    "(...) Inflows in index management amounted to close to USD7 billion. Amundi’s two main strengths remain its exceptional pricing power and its ability to create customised solutions for French and international institutional and sovereign clients. In 2014 two strategic partnerships were established with index providers, the first of which with the EDHEC Risk Institute Scientific Beta to strengthen Amundi’s capabilities in index smart beta management. (...)"
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  • Institutional Asset Manager (15/01/2015)
    EDHEC-Risk Institute and Rothschild & Cie launch research chair on active allocation to smart factor indices
    "(...) Rothschild & Cie and EDHEC-Risk Institute have announced the creation of a new research chair at EDHEC-Risk Institute entitled "Active Allocation to Smart Factor Indices." This new chair will follow on from the previous Rothschild & Cie research chair at EDHEC-Risk Institute on "The Case for Inflation-Linked Corporate Bonds: Issuers' and Investors' Perspectives." Led by Professor Noël Amenc, Director of EDHEC-Risk Institute, and Professor Lionel Martellini, Scientific Director of EDHEC-Risk Institute, the research chair team will examine the benefits of smart beta allocation. (...)"
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  • Risk.net (14/01/2015)
    Investors underestimating smart beta risks, academics warn
    "(...) A recent paper published by the indexing arm of EDHEC-Risk Institute found that smart beta indexes frequently incorporate untested proprietary adjustments into their methodologies - something that could increase uncertainty for investors - and often ignore academic research in the process. The paper looked at a selection of indexes to examine their relative robustness - defined as the ability to perform in line with market conditions - and their absolute robustness - the ability to outperform the market. "The potential opportunity is very well documented, but sometimes investors may not be aware, relative to popular benchmarks, that they're building up a magnitude of risk," says Felix Goltz, head of applied research at EDHEC-Risk in Nice and one of the paper's authors. Goltz says index providers should spell out the risks more clearly. But he adds that investors need to carry out due diligence and look more closely at a smart beta index's methodology to see whether it derives from academic consensus on how to build a successful strategy. If the methodology strays too far from this consensus, then investors - especially those in the less sophisticated retail space - may find it hard to assess the risks associated with the index, Goltz says. "These indexes are transparent, so you'll be able to find how they define momentum in most cases. But often, the communication still basically says: "These are the standard factors - they are academically justified"." Goltz says that while it would be straightforward for an index provider to show how its methodology could affect an index's returns, this is typically not done by the industry. (...)"
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  • L'Agefi Suisse (14/01/2015)  
    ERI SciBeta: Smart Beta Performance Report
    "(...) La référence smart beta SciBeta Developed Low Liquidity Diversified Multi –Strategy Index, conçu par l’ERI Scientific Beta, a enregistré la meilleure performance en décembre 2014 parmi les indices «smart factor». Sa performance relative mensuelle, par rapport à sa référence construite en fonction de la capitalisation boursière, a été de 1,52% le mois dernier, annonce l’ERI Scientific Beta, dans son rapport mensuel de performances publié hier. (...) L’exercice 2014 s’est également traduit par une plus haute performance absolue des indices smart factor par rapport aux indices traditionnels de l’univers des Moyennes capitalisations et des titres Value. «En calculant la moyenne des rendements relatifs des quatre facteurs de risque les mieux rémunérés (Taille, Momentum, Faible Volatilité («Low-Volatility») et Value) par fournisseur d’indices, les indices du Scientific Beta affichent les meilleurs résultats», poursuivent les experts de SciBeta. Soulignant qu’en 2014, ceux-ci sont en hausse de 2,42% contre 0,86% pour les indices MSCI, une perte de 0,37% pour les indices FTSE et une perte de 1,65% pour les indices Russell. (...)"
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  • Property Funds World (07/01/2015)
    EDHEC IEIF Commercial Property (France) Index adds variable-capital SCPIs from 1 Jan
    "(…) The EDHEC IEIF Commercial Property (France) Index is now including variable-capital SCPIs (Société Civile de Placement Immobilier or real estate investment company) invested in commercial property). There is no change to the index composition rules: only SCPIs that have recorded trading volume of more than EUR2 million on the secondary market during the previous year will be included. The secondary market is the share trading market organised by SCPI investment companies in accordance with articles 422-21 to 39 of the AMF’s (French financial market authority) general regulations. For variable-capital SCPIs, the price considered in the calculation of the index is the subscription prices of compensated withdrawals, determined by the investment company. (...)"
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