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EDHEC-Risk Information

EDHEC-Risk in the Press

Articles published in 2016

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


December 2016

  • The Asset (29/12/2016)
    Asia warms up to new ETF offerings
    "(...) Technology has enabled the development and commoditization of factor investing, or smart beta. But choosing the right strategy is also fraught with perils, as products are often marketed on the basis of simulated past performance. A result of factor-mining or model-mining, their performance may not materialize after the product is launched. “You need to rely on empirical evidence and multiple studies showing that factors have outperformed in the past,” says Frederic Ducoulombier, founding director at EDHEC Risk Institute-Asia. While selecting the right factors, investors need to look for economic rationale justifying the model. “[They need to] make sure that there’s a good story.” (...)"
    Copyright Asset Publishing and Research Limited [Full text]


  • Plan Sponsor (08/12/2016)
    LGIMA Launches New Scientific Beta Funds for Retirement Plans
    "(...) The U.S. index fund management business of Legal & General Investment Management America (LGIMA) is moving forward with Scientific Beta Multi-factor strategies using commingled funds designed for institutional investors. The new funds will be aimed at defined benefit (DB), defined contribution (DC), Taft-Hartley, and public plans. LGIMA will be launching four funds comprising the global, U.S., developed ex-U.S., and emerging market components of the Scientific Beta Multi-factor indices. These indices will initially have exposure to the low volatility, value, momentum and size factors. It will use weighting methodologies that seek to improve diversification and risk-adjusted returns relative to market-cap weighted indices. (...)"
    Copyright Strategic Insight, Inc. [Full text]


  • HedgeWeek (08/12/2016)
    Third edition of Yale SOM-EDHEC-Risk Certificate in Risk and Investment Management to commence January 2017
    "(...) The third edition of the Yale School of Management (SOM)-EDHEC-Risk Institute Executive Seminar series will be commencing in January 2017. A series of seminars focused on Advanced Risk and Investment Management, with a program designed by Lionel Martellini, Professor of Finance, EDHEC Business School and Director of EDHEC-Risk Institute and Will Goetzmann, Edwin J Beinecke Professor of Finance and Management Studies, Director of the International Center for Finance, Yale School of Management, will be held in New Haven and London. (...)"
    Copyright GFM Limited [Full text]


November 2016

  • Benefits and Pensions Monitor (23/11/2016)
    EDHEC Explores Novel Approach
    "(...) The EDHEC-Risk Institute explores a novel approach to address the challenge raised by the standard investment practice of treating attributes as factors, with respect to how to perform a consistent risk and performance analysis for equity portfolios across multiple dimensions that incorporate micro attributes. ‘Multi-Dimensional Risk and Performance Analysis for Equity Portfolios’ suggests treating attributes of stocks as instrumental variables to estimate betas with respect to risk factors for explaining notably the cross-section of expected returns. In one example of implementation, it maintains a limited number of risk factors by considering a one-factor model and estimates a conditional beta that depends on the same three characteristics that define the Fama-French and Carhart factors. In so doing, it introduces an alternative estimator for the conditional beta, ‘fundamental beta’ (as opposed to historical beta), because it is defined as a function of the stock’s characteristics. (...)"
    Copyright Benefits and Pensions Monitor [Full text]


  • International Securities Services (23/11/2016)
    Novel approach for measuring market exposure of stock portfolios
    "(…) Multi-factor models are standard tools for analysing the performance and the risk of equity portfolios. In addition to analysing the impact of common factors, equity portfolio managers are also interested in analysing the role of stock-specific attributes in explaining differences in risk and performance across assets and portfolios. In a new publication entitled “Multi-Dimensional Risk and Performance Analysis for Equity Portfolios”, EDHEC-Risk Institute explores a novel approach to address the challenge raised by the standard investment practice of treating attributes as factors, with respect to how to perform a consistent risk and performance analysis for equity portfolios across multiple dimensions that incorporate micro attributes. 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”. (...)"
    Copyright Capital Markets Media Ltd. [Full text]


  • Agefi Luxembourg (22/11/2016)  
    CACEIS : EDHEC-Risk Institute propose une nouvelle approche dynamique pour mesurer l'exposition au marché des portefeuilles actions
    "(…) Les modèles multifactoriels sont des outils standards d'analyse de la performance et du risque des portefeuilles actions. Outre l'impact des facteurs ordinaires, les gérants de portefeuilles actions analysent également comment les attributs propres aux actions peuvent expliquer les differences observes entre divers actifs et portefeuilles en matière de performance et de risque. Dans sa nouvelle publication, Multi-Dimensional Risk and Performance Analysis for Equity Portfolios, EDHEC-Risk Institute envisage une approche originale face aux pratiques d'investissement classiques qui considèrent les attributs comme des facteurs et aborde la meilleure façon d'analyser de manière cohérente la performance et le risque des portefeuilles actions au travers de multiples critères... (…)"
    Copyright Agefi Hebdo [Full text - Registration required]


  • The Reverse Review (November 2016)
    Spotlight: Knowing Our Product and Selling It Right
    "(…) This is a theme that Nobel Laureate and distinguished MIT professor Dr. Robert C. Merton repeated again and again at his keynote address at Oxford University at the JOIM-Oxford-EDHEC conference in September. Every reverse mortgage product around the world is unique because it is a non-recourse contract. (...)"
    Copyright Reverse Publishing, LLC. [Full text - Registration required]


  • Funds Europe (November 2016)
    FRENCH ETFS: France’s ETF pioneers
    "(…) Amundi has partnered with a variety of index providers so is able to offer a broad range of products. It released its second product with Scientific Beta, the commercial arm of the EDHEC Institute, earlier this year. This multi-factor smart beta product adds to the firm’s comprehensive range of mono-strategy ETFs, which include minimum volatility, mid-cap, small-cap, growth, value, high dividend and buybacks. “Some clients want to pick and choose within mono-factor ETFs and build themselves a strategy, while others want an already mixed set of factors, which is why we also offer two multi-factor ETFs,” says Wurtz. (...)"
    Copyright Funds Europe [Full text - Registration required]


  • IPE (16/11/2016)
    Wednesday people roundup
    "(...) EDHEC-Risk Institute – Mark Fawcett, CIO of the trustee body running the £1bn (€1.1bn) UK mastertrust NEST, has been appointed chairman of the institute’s international advisory board. He replaces Tomas Franzén, chief investment strategist at Sweden’s AP2. The role of the international advisory board is to consult on the relevance and goals of the research programme proposals presented by the centre’s management and to evaluate research outcomes with respect to their potential impact on industry practices. It counts 35 members. (…)"
    Copyright IPE [Full text - Registration required]


  • Actuarial Post (16/11/2016)
    Mark Fawcett appointed new chairman of EDHEC-Risk Institute
    "(...) EDHEC-Risk Institute is pleased to announce the appointment of Mark Fawcett as chairman of its international advisory board. He is Chief Investment Officer of NEST Corporation, the trustee body responsible for running NEST, the National Employment Savings Trust. (...) Mark said, “I’m delighted to be appointed chair. I look forward to supporting EDHEC-Risk Institute in continuing to deliver actionable insights for asset owners and managers with a view to generating better returns for investors. This type of thought leadership is particularly pertinent given the shifting regulatory and economic outlook in the UK and globally.” As chairman, Mark succeeds Tomas Franzén, former Chief Investment Strategist with Andra AP-fonden (AP2) and Founder of Franzen Advisory. (…)"
    Copyright Actuarial Post [Full text]


  • Chief Investment Officer (15/11/2016)
    NEST CIO to Chair EDHEC-Risk Board
    "(...) EDHEC-Risk Institute has appointed National Employment Savings Trust (NEST) CIO Mark Fawcett as chairman of its international advisory board. The advisory board consults and advises on research and educational initiatives brought on by the EDHEC-Risk Institute. Fawcett has been a “tremendously active” member for the last six years, bringing “a wealth of experience in the retirement space,” said Lionel Martellini, EDHEC Business School professor and institute director. “EDHEC-Risk Institute is extremely fortunate to have in its new board chair such an experienced and talented individual,” Martellini said. “Mark… is an extremely relevant fit with respect to our institute’s increased focus on welfare improving investment solutions for both institutional and individual investors.” (...)"
    Copyright Strategic Insight Inc. [Full text]


  • The Hedge Fund Journal (15/11/2016)
    EDHEC-RISK Appoints Fawcett
    "(...) EDHEC-Risk Institute is pleased to announce the appointment of Mark Fawcett as chairman of its international advisory board. He is Chief Investment Officer of NEST Corporation, the trustee body responsible for running NEST, the National Employment Savings Trust. NEST was set up specifically to support changes that meant UK employers now have to automatically enrol their workers into a workplace pension scheme. Since its creation in 2011 NEST has become one of the largest master trusts in the UK and currently has over 200,000 employers signed up, 3.7 million members and over £1.2 billion assets under management. “EDHEC-Risk Institute is extremely fortunate to have in its new board chair such an experienced and talented individual,” said Lionel Martellini, Professor of Finance, EDHEC Business School and Director of EDHEC-Risk Institute. (…)"
    Copyright The Hedge Fund Journal [Full text]


October 2016

  • Pensions Expert (31/10/2016)
    What's behind factor investing
    Article by Felix Goltz, research director, ERI Scientific Beta
    "(…) With pension funds increasingly embracing risk factor investing, it is essential to ensure a factor premium is supported by empirical analysis, economic rationale and a simple factor definition. (...) It is daunting to conduct empirical analysis to establish which risk factors carry a reward. Researchers struggle to estimate expected returns, simply because they rely on very few data points: the starting price level and the end date price level. This is also true for factor returns. As such, when testing whether a factor carries a premium, academic research conducts a thorough assessment, including the analysis of very long-term data across different regions and asset classes, and includes various corrections for possible data mining biases. These studies are open to criticism and numerous papers are written to question previous empirical results. Consequently, academic research is much more capable of providing meaningful conclusions than a simple product backtest for a given factor index product. (...)"
    Copyright The Financial Times Limited [Full text]


  • Bloomberg (27/10/2016)
    Goldman’s Multifactor Robots: A Post-Human Investing Guide
    "(…) “The factors that have been proven again and again are simple,” said Felix Goltz at EDHEC Risk Institute, part of a team that published an April study countering accusations that factor investing provides a mathematical gloss to random returns. “Very often, providers come up with complex factor definitions that are original and different from the academic work, with several adjustments. You come up with a result that could be a fluke.” (...) “The choice of active managers isn’t very transparent with what factor tilt they have. They’d like to claim they have some unique skill and aren’t very keen on being more transparent,” said Goltz. “You can design these tilts to certain factors in ETFs and in principle, it allows you to be more transparent than active managers.” (...)"
    Copyright Bloomberg L.P. [Full text]


  • Citywire New Model Adviser (26/10/2016)
    Why investors need to analyse smart beta
    "(…) ‘Smart’ and ‘dumb’ are words thrown around in the investment industry almost as much as in politics, and with just as little meaning. Beta is neither smart nor dumb, but it can be bought in either fashion. A new study, Investor Perceptions about Smart Beta ETFs, by Noel Amenc, Felix Goltz, and Veronique Le Sourd, suggests investors are not approaching beta particularly smartly. Issued in August by the EDHEC-Risk Institute, the report asked professional investors how much time they spent evaluating traditional passive investments, active managers and smart beta or systematic factor investments. It found respondents spent 21% of their time evaluating traditional passive managers, 23% of their time assessing active managers, but only 15% of their time investigating smart beta. (…)"
    Copyright citywire.co.uk [Full text]


  • ETF.com (21/10/2016)
    Mixed Vs. Integrated Multifactor ETF Portfolios
    "(...) A mixed approach is one in which a portfolio is built for each target factor individually, and those portfolios are combined as sleeves to create a multifactor portfolio. (...) ETFs Using a Mixed Approach: Global X Scientific Beta US Equity ETF (SCIU). (...) At Newfound, we currently advocate for a mixed approach. (...) To date, the majority of research has substantiated the individual factors as historically reliable ways to generate excess risk-adjusted returns; evidence suggesting that securities with multiple simultaneous factor exposures are better is still lacking. (...)"
    Copyright ETF.com [Full text]


  • Les Echos (14/10/2016)  
    Robo-advisors : le début d’une nouvelle révolution en finance ?
    Article par Lionel Martellini, Professeur de finance à l’EDHEC Business School et directeur de EDHEC Risk Institute
    "(...) Grâce aux fintechs, la gestion de patrimoine sera bientôt à la portée de tous, et même des plus jeunes ! Lionel Martellini, Professeur de finance à l’EDHEC Business School, revient sur l’essor de ces robo-advisors qui façonnent le monde de la finance de demain. 2.200 milliards de dollars, c’est la taille que pourrait atteindre l’industrie des robo-advisors à l'horizon 2020, contre 200 milliards aujourd’hui, selon une étude menée par A.T. Kearney ! Une véritable révolution industrielle est en marche, sous l'impulsion de fintech comme Betterment ou Wealthfront aux Etats-Unis, Yomoni, Marie Quantier, Fundshop ou encore Advize en France… Mais que sont réellement les robo-advisors ? Concrètement, ce sont des outils digitaux permettant de fournir un service de gestion de fortune aux particuliers, en quête de conseils pour placer leur épargne. Leur principal avantage : un coût d’entrée et des frais de gestion considérablement réduits. (...)"
    Copyright Les Echos [Full text - French]


  • Funds Europe (12/10/2016)
    PERFORMANCE: Crash landing
    "(…) A row broke out this year when a pioneer in the sector warned that as smart beta funds grow in size, certain products could go ‘horribly wrong’. Funds Europe looks at what lay behind the controversy – and asks what safeguards there are for investors. (...) Eric Shirbini, product specialist at ERI Scientific Beta, says that the real answer is we don’t know about a crash. Factors are cyclical. There are periods of time when they are going to hurt you; that’s what you’re being paid for, to hold through those times, he says. Like Asness, Shirbini says timing a cycle is difficult. Asness discusses two forms of factor timing: one is to hold less of a factor depending on market conditions; the other, more extreme form is to declare a previously useful factor “now forever gone”. However, Shirbini adds that factors are risk premia, the same as equities markets, so is it possible to time the stock market? Only with extreme difficulty and a huge amount of luck. (...)"
    Copyright Funds Europe [Full text - Registration required]


  • Funds Europe (12/10/2016)
    POPULARITY: Popularity contest
    "(…) The problem with backing a smart beta factor – such as a low volatility fund, for example – is that the factor could become more expensive as it gains in popularity, eroding any advantages, say experts. (...) Eric Shirbini, product specialist at ERI Scientific Beta, thinks crowding is the wrong word for beta strategies, and that it applies more to alpha strategies: “Hedge fund strategies, where you have some sort of alpha secret source – when people know about it, that alpha is going to disappear. Crowding is used for alpha, not beta. How many people say that the US equities market is overcrowded?” (...)"
    Copyright Funds Europe [Full text - Registration required]


  • Exchange-Traded Funds (08/10/2016)
    EDHEC-Risk Institute study highlights the added value of active allocation to smart beta indices
    "(...) In a new study entitled "Active Allocation to Smart Factor Indices", drawn from the eponymous Rothschild & Cie research chair, EDHEC-Risk 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. (...)"
    Copyright exchangetradedfunds.com [Full text]


  • Benefits and Pensions Monitor (04/10/2016)
    Smart Beta Used To Improve Process
    "(...) Investors consider smart beta indices as tools for improving their investment process, says research from the EDHEC-Risk Institute. ‘Investor Perceptions about Smart Beta ETFs’ found 81 per cent think that smart beta indices avoid concentration in very few stocks or sectors and 79 per cent think that diversification across several weighting methodologies allows a reduction of risk and adds value. Its survey also shows a high global rate of satisfaction (86 per cent) towards smart beta among ETF users with capturing factor premia the prime motivation for 87 per cent of respondents for investing in smart beta ETFs. Value, low volatility, and size factors are also considered as the most likely to be rewarded. However, despite this growing interest for smart beta products, investors allocate fewer resources to the assessment of smart beta when compared to the appraisal of active managers or the evaluation of cap-weighted-indices. While a quarter of full-time staff is dedicated to the evaluation of active managers, only 10 per cent of staff is dedicated for the evaluation of smart beta or systematic factor investments. (...)"
    Copyright Benefits and Pensions Monitor [Full text]


  • Citywire Selector (04/10/2016)
    PassiveBeat: how to be dumb with smart beta
    "(…) Beta isn’t smart or dumb, but it can be bought in either fashion. A new study suggests investors aren’t approaching beta particularly smartly. The report by the EDHEC-Risk Institute last month asked professional investors how much time they spent evaluating traditional passive investments, active managers, and smart beta or systematic factor investments. The respondents spent 21% and 23% of their time evaluating traditional passive and active managers, respectively, but only 15% of their time on smart beta. (...) ‘In the end, the mismatch between investors’ great expectations in smart beta, and the lack of resources to carry out comprehensive and due-diligence analysis on smart-beta products, is a thorny issue,’ warned EDHEC-Risk. ‘The asymmetry of information between smart-beta investors and smart-beta providers may lead to many misconceptions, all the more that smart-beta providers may be unscrupulous.’ (…)"
    Copyright citywireselector.com [Full text]


  • IPE (October 2016)
    An industrial revolution
    "(...) In a recent paper for the Journal of Investment Management, Prof Lionel Martellini of EDHEC Business School and director of the EDHEC-Risk Institute points to the high levels of innovation in institutional investment, like liability-driven and risk-factor investing, and in the retail segment with such developments as exchange-traded funds. This has not been matched by innovation in mass-market areas like defined contribution investing. Speaking at a recent conference, Martellini echoed the views of Prof Robert Merton, who sees the need for a strong focus on target income in retirement and away from a pure focus on account balances. An individual may not appreciate that an increase in account balance may not be associated with an increase in future annuity purchasing power if interest rates fall at the same time. (…)"
    Copyright IPE [Full text - Registration required]


September 2016

  • ETF Strategy (30/09/2016)
    Amundi/EDHEC study finds high satisfaction among smart beta ETF users
    "(...) Smart beta exchange-traded funds are meeting investors’ expectations, with a satisfaction rate of 86%, according to a survey of 180 European investment professionals conducted by EDHEC-Risk Institute and commissioned by Amundi ETF. (...) When asked how smart beta has improved their investment processes, 81% of investors believe smart beta indices avoid concentration in very few stocks or sectors, and 79% think diversification across multiple strategies allows a reduction of risk and adds value. The prime motivation for 87% of respondents when investing in smart beta ETFs is the capturing of factor premia, with value, low volatility and size factors considered as the most likely to be rewarded. Ease of implementation, low turnover and transaction costs are considered to be key factors when adopting a strategy. (...)"
    Copyright ETF Strategy Ltd [Full text]


  • ADVISOR.CA (29/09/2016)
    Investors want smart beta ETFs: study
    "(...) Investors’ appetite for smart beta ETFs is growing, requiring greater investor information and education, reveals an EDHEC-Risk Institute survey of 180 European ETF investors. The survey results are part of a study entitled “Investor Perceptions about Smart Beta ETFs.” The study’s key findings: Among ETF users, there’s a high global rate of satisfaction (86%) toward smart beta. Smart beta indexes avoid stock or sector concentration (say 81% of respondents), and diversification across several weighting methodologies allows a reduction of risk and adds value (say 79% of respondents). (...)"
    Copyright Rogers Media Inc. [Full text]


  • Benefits and Pensions Monitor (28/09/2016)
    ERI Signs PRI
    "(...) ERI Scientific Beta has signed the United Nations-supported Principles for Responsible Investment (PRI). Forerunners in the domain of socially responsible investment (SRI) and low carbon smart beta investing, the EDHEC-Risk Institute and ERI Scientific Beta have been providing a custom SRI smart beta index to the additional pension scheme for French civil servants, ERAFP, since June 2011. In early 2015, ERI Scientific Beta launched a series of low carbon smart beta indices that enable institutional investors to significantly reduce the carbon intensity of their equity investments, while at the same time outperforming traditional market indices. The exclusion from the index of the largest carbon emitters, the worst firms in terms of carbon intensity in each sector of activity, and the largest holders of fossil assets, guarantees that these indices have a strong positive impact on the environment by weighing on the value of the stocks of the excluded firms, thereby obliging them to change their strategy or their production process in order to be removed from the exclusion list. (...)"
    Copyright Benefits and Pensions Monitor [Full text]


  • Financial Investigator (27/09/2016)
    ERI Scientific Beta signs United Nations-supported Principles for Responsible Investment
    "(...) ERI Scientific Beta announced today, September 27, 2016, that it has signed the United Nations-supported Principles for Responsible Investment (PRI). Forerunners in the domain of Socially Responsible Investment (SRI) and low carbon smart beta investing, EDHEC-Risk Institute and ERI Scientific Beta have been providing a custom SRI smart beta index to the additional pension scheme for French civil servants, ERAFP, for over five years (since June 2011). Earlier this year ERAFP announced that it is awarding a mandate to asset managers for a listed equities portfolio worth €500 million to €1 billion that will be benchmarked to the Scientific Beta Eurozone Max Sharpe Ratio ERAFP SRI Carbon Efficient index. ERI Scientific beta has been supplying an SRI-compliant custom version of its flagship Multi-Beta Multi-Strategy index to a major Scandinavian investor since 2014. (...)"
    Copyright Financial Investigator Publishers [Full text]


  • Benefits and Pensions Monitor (26/09/2016)
    Latest Concepts Examined
    "(...) The inaugural EDHEC-Risk Smart Beta Day Europe, organized by the EDHEC-Risk Institute in partnership with ERI Scientific Beta, will showcase the latest conceptual advances and research results in smart beta investing. Sessions will address themes such as beyond low volatility and minimum volatility strategies; what can be learned from academic research about smart beta investing; and whether smart beta delivers what it promises. It takes place October 13 in Amsterdam, the Netherlands. (...)"
    Copyright Benefits and Pensions Monitor [Full text]


  • Barron's (26/09/2016)
    A.M. Funds Roundup: How to ‘Short Vol’ Using ETPs; Performance-Based ETF Fees?
    "(…) Links to the best reading in funds investing: Ten misconceptions about “smart beta” ETFs – EDHEC-Risk Institute. (...)"
    Copyright Barron's [Full text]


  • Reverse Mortgage Daily (25/09/2016)
    Nobel Laureate Calls for Global Improvement of Reverse Mortgages
    "(...) The need for alternative funding sources isn’t only an American retirement imperative, but a global necessity for aging adults who can benefit from using housing wealth to support their longevity, according to one Nobel laureate in Economics. In a keynote address this month, Dr. Robert C. Merton, distinguished professor of finance at the MIT Sloan School of Management and 1997 Nobel Laureate in Economics, spoke at the the 2016 Retirement Investing Conference in Oxford, England, sponsored by the Journal of Investment Management (JOIM), Oxford University and the EDHEC Risk Institute. During his speech, Merton encouraged conference participants hailing from the United Kingdom, Asia, South Africa, Australia, Europe and the United States, to engage in product innovation for both annuities and housing wealth as part of a global effort to improve retirement income security throughout the world.(...)"
    Copyright Reverse Mortgage Daily [Full text]


  • Financial Advisor (19/09/2016)
    Smart Beta Evolves, But Beware Of Dumb Products
    "(...) Global X started down the smart beta path in 2007, when it launched a suite of super-dividend ETFs that attempted to offer exposure to the highest-yielding equities in the world. Since then, Global X has launched a suite of multifactor ETFs designed in partnership with academic researchers at Europe’s EDHEC business school.(...)"
    Copyright Charter Financial Publishing Network Inc. [Full text]


  • Louis Bachelier.org (19/09/2016)  
    Comment réduire le risque de contrepartie sur les produits dérivés de gré à gré non compensés centralement ?
    "(...) La crise financière a mis en lumière l’importance du risque de contrepartie des marchés de produits dérivés de gré à gré non compensés centralement. Ces derniers font d’ailleurs l’objet de nouvelles réglementations pour définir des niveaux de garantie adéquats permettant de gérer efficacement le risque systémique bancaire. D’après l’article “Initial margin for non-cleared OTC derivatives”, écrit par Dominic O’Kane, ainsi qu’un entretien avec ce dernier. (...) Le mois de septembre 2008 a constitué un tournant pour la finance internationale : les bilans de nombreux acteurs du secteur sont connectés par plusieurs milliers de produits dérivés complexes qui se négocient de gré à gré – c’est-à-dire hors d’un marché organisé – et surtout ne sont pas compensés centralement. Résultat : les risques de contrepartie se sont multipliés – avec la faillite de plusieurs banques – et une contagion d’ordre systémique n’a été évitée que de justesse grâce à l’intervention des etats. Face à cette menace, les régulateurs internationaux, via le G20 de Pittsburgh de septembre 2009, ont adopté des mesures pour réduire les risques associés aux produits dérivés échangés de gré à gré. (...)"
    Copyright Institut Louis Bachelier [Full text]


  • Retirement Income Journal (07/09/2016)
    The Essence of Goal-Based Investing
    "(…) Goal-based investing is more than just mental accounting that assigns labels like “house,” “college” or “retirement” to different pots of money. It's ultimately about risk management, as we learned from Lionel Martellini, director of France's EDHEC Risk Institute. (...) A switch to goal-based investing, for instance, changes the way advisors assess their clients’ risk capacity. Instead of asking new clients how far they could stand to watch the value of their accounts drop without panicking, a goal-based advisor measures a client’s risk “capacity” or risk “budget” by calculating how much of their savings clients can afford to put into risky assets without jeopardizing the achievement of their savings goals. “Risk aversion is irrelevant,” Martellini said. “We need to understand loss aversion, relative to goals, not risk aversion.” In practice, different clients will have different risk capacities. It won’t depend on their fortitude in the face a market downturn. It will depend on the differences between their savings rates, their time horizons, and the amount of savings they’ll need to fund their retirements. (...)"
    Copyright RIJ Publishing LLC [Full text]


August 2016

  • Pensions & Investments (25/08/2016)
    Smart beta is not alpha
    Article by Noël Amenc, Professor of Finance at EDHEC Business School and CEO of ERI Scientific Beta
    "(...) In a recent opinion piece published on Pensions & Investments' website titled “Factor indexes: Choose with care,” John Chisholm, chief investment officer of Acadian Asset Management, sought to make a distinction between the “simplistic” “factor factories” of index providers and an “alpha modeling” approach to factor investing that would be representative of the “true” quant approach that only active managers can offer. One can understand that the success of new passive investment offerings worries active managers whose performances often fail to justify their high fees. One can also find that it is good business practice when faced with investors' increasing interest in factor investing, which actually gives access to betas beyond the broad market premium, to attempt to communicate and to position oneself in such a way as to preserve the search for alpha. It is nonetheless regrettable that this marketing strategy is based on approximations or assertions that do not have any real academic justification. (...)"
    Copyright Pensions & Investments [Full text]


  • Portfolio Adviser (10/08/2016)
    European investors make switch to smart beta
    "(...) ERI Scientific Beta is one of those niche firms active in Europe. Some $10.3bn of assets currently track their customised smart beta strategies. The relatively high fees providers ask for smart beta funds compared to market capitalisation ETFs still put off many wholesale investors. To soothe these concerns, ERI announced this spring that it would give investors the option not to pay fixed fees any longer. Instead, they would have to pay a 20% fee on all outperformance generated by ERI’s indices. (...)"
    Copyright Last Word Media Limited [Full text]


  • Exchange-Traded Funds (08/08/2016)
    ERI Scientific Beta Defensive Strategies: Bringing Diversification to, and Going Beyond, Traditional Approaches
    "(...) While defensive strategies are designed to lower exposure to market risk so as to provide relative downside protection in bear markets, they have also returned sterling risk-adjusted performance over the long term, challenging the Capital Asset Pricing Model's central prediction of a linear relationship between market risk and return. In a research publication entitled "ERI Scientific Beta Defensive Strategies: Bringing Diversification to, and Going Beyond, Traditional Approaches", we review improved forms of traditional defensive strategies and an Adaptive Defensive Solution through the use of smart factor indices.(...)"
    Copyright exchangetradedfunds.com [Full text]


  • Citywire Selector (05/08/2016)
    Nordic boutique bolsters factor-driven equity fund range
    "(…) Finnish investment firm Evli has doubled the number of factor-driven investment funds in its stable with the launch of a US-focused strategy. (...) This new fund, which was formally unveiled on August 4, focuses on four academically determined factors: value, low volatility, momentum and quality. The fund invests in these factors by tracking ERI Scientific Beta's index. Amendments to the fund's portfolio are generally made four times per year in conjunction with updates of the factor index. (…)"
    Copyright citywireselector.com [Full text]


  • Forbes (03/08/2016)
    AGG, SCIU: Big ETF Inflows
    "(…) And on a percentage change basis, the ETF with the biggest increase in inflows was the Scientific Beta US ETF (SCIU), which added 550,000 units, for a 28.2% increase in outstanding units. Among the largest underlying components of SCIU, in morning trading today Aflac (AFL) is up about 0.1%, and AGL Resources (GAS) is relatively unchanged. (…)"
    Copyright Forbes Media LLC [Full text]


July 2016

  • CNN Money (29/07/2016)
    A Scientific Approach To Multi-Factor Investing
    "(…) A steady stream of multi-factor exchange traded funds have been coming to market for over a year now. Multi-factor ETFs offer investors exposure to several investment factors – the idea being that investors don't need to time when a certain factor will perform well and when others will fall out of favor. The Global X Scientific Beta US ETF (NYSE: SCIU), which is 14 months old, has proven, in real time, the advantages of the multi-factor structure. SCIU is part of a suite of Global X ETFs that follow “EDHEC-Risk Institute indices that target multiple factors, including low-volatility, momentum, size and value. The indices also combine the five models, including Maximum Deconcentration, Maximum Decorrelation, Efficient Minimum Volatility, Efficient Maximum Sharpe Ratio, and Diversified Risk Weighted,” according to ETF Trends. (...) Year-to-date, SCIU is outpacing the S&P 500 by nearly 200 basis points, which some onlookers might attribute to the ETF's low volatility exposure. A deeper look reveals some intersection of the low volatility and momentum factors. (…)"
    Copyright Cable News Network [Full text]


  • Seeking Alpha (26/07/2016)
    Multi-Factor, Multi-Strategy, Multi-Winners!
    "(...) In January of this year, I wrote an article about the Scientific Beta suite of multi-factor, multi-strategy ETFs. I described the ideas behind the design and construction of those funds, and also pointed out their benchmark-crushing success in the ~8 months through their inception. Now with over 1 year under their belt, I believe that these funds deserve a serious look from equity investors. (...) The four funds are: Global X Scientific Beta U.S. ETF (NYSEARCA: SCIU), Global X Scientific Beta Europe ETF (NYSEARCA: SCID), Global X Scientific Beta Japan ETF (NYSEARCA: SCIJ), Global X Scientific Beta Asia ex-Japan ETF (NYSEARCA: SCIX). (...) This is crushing outperformance and it bodes well for the future of the Global X ETFs going forward. Both Japan and Asia ex-Japan multi-factor funds scored 10%+ alpha. Europe had nearly 6% alpha over the past year, while U.S. was the lowest at 1.36%. (...)"
    Copyright Seeking Alpha [Full text]


  • Funds Europe (July-August 2016)
    EDHEC RESEARCH: Time management
    "(…) Cost is one of the main reasons ETF usage is increasing and investors spend as much time evaluating passive investments as they do active. The EDHEC-Risk Institute’s Felix Goltz and Véronique Le Sourd explain their findings. The increasing use of exchange-traded funds (ETFs) was identified by the ninth EDHEC-Risk Institute survey of European investment professionals on the usage and perceptions of ETFs conducted at the end of 2015. ETFs make up an increasing proportion of portfolio holdings across asset classes and satisfaction has remained at high levels, especially for traditional asset classes. There has been a significant increase in satisfaction with equity ETFs, which now enjoy a satisfaction rate of 98%, compared to 91% in 2014. The satisfaction rates for ETFs based on the most liquid asset classes are far more consistent compared to those based on illiquid asset classes. Investors also recognise the high quality of ETFs when compared to competing indexing vehicles. (...)"
    Copyright Funds Europe [Full text - Registration required]


  • Benefits and Pensions Monitor (25/07/2016)
    Smart Beta Claims Present Risks
    "(...) Performance drivers and strategy design choices are among the mistaken claims about smart beta that present risks for investors, says research from the EDHEC Risk Institute. The performance driver claims include beliefs that smart beta generates alpha and anything beats cap-weighted market indices. It says investability hurdles claims include liquidity concerns that smart beta requires positions to be held in highly illiquid stocks and that smart beta necessarily leads to high turnover. And strategy design choices state a good factor index should provide a strong tilt to the desired factor, requires a sophisticated scoring approach, and needs to isolate exposure to the target factor. The research suggests that, more often than not, superficially convincing claims about smart beta strategies stand on shaky foundations. (...)"
    Copyright Benefits and Pensions Monitor [Full text]


  • IPE (25/07/2016)
    EDHEC seeks to debunk Top 10 misconceptions of smart beta strategies
    "(...) Providers of smart beta investment strategies have allowed too many misconceptions to circulate about the range of investment management types they market, according to research by EDHEC-Risk Institute. In a paper centred around 10 common but “mistaken” claims about smart beta, the arm of France’s EDHEC Business School said smart beta had drawn fierce criticism from advocates of traditional active management and of passive management alike. “Smart beta providers have not only responded to such criticism but have also been vocal about the benefits of their respective approaches, without necessarily agreeing with one another,” it said. (...) EDHEC-Risk Institute said in its conclusion that many of the misconceptions it was debunking corresponded to over-generalisations that failed to acknowledge that the term ‘smart beta’ covers a huge array of strategies that could have very different properties. “In a nutshell, our analysis cautions against such over-simplification and calls for a rigorous and detailed analysis of smart beta strategies,” it said.(…)"
    Copyright IPE [Full text - Registration required]


  • FTfm (25/07/2016)
    There is a smarter way to make green portfolios profitable
    Article by Noël Amenc, professor of finance at the EDHEC Risk Institute
    "(...) Finance professionals have been willing to believe for several years that a portfolio exposure to low-carbon stocks would be profitable in the long run. The sole logic of profit should therefore incite institutions to redirect their investments towards the most virtuous businesses in terms of carbon footprint. Unfortunately, any serious analysis of how financial markets operate and how financial asset prices are formed leads one to believe that this natural evolution of financial markets towards a greener world is more than a little doubtful. (...) Recent research shows it is entirely possible to reduce a portfolio’s carbon footprint dramatically — by more than 80 per cent — while guaranteeing improved profitability. To do so, it is necessary to exclude companies with the largest carbon footprints, then use traditional portfolio construction techniques that do not concern themselves with the future excess returns of green stocks but are based on the right exposure to traditional rewarded risk factors. Such a green strategy is profitable, not because it is green but because it is smart. (...)"
    Copyright Financial Times Fund Management [Full text]


  • Investment Week (22/07/2016)
    Ten common misconceptions about smart beta investing
    "(…) The EDHEC Risk Institute has released a piece of research on the most common misconceptions in smart beta investing, including performance drivers, investability hurdles and strategy design choices, which could pose risks for investors. The paper, co-authored by Noël Amenc, Frédéric Ducoulombier, Felix Goltz and Jakub Ulahel, was published with the objective to "shed light on the underlying issues" in smart beta strategies, which have been steadily gaining popularity among investors.(...)"
    Copyright Incisive Business Media (IP) Limited [Full text]


  • Funds Europe (21/07/2016)
    Top 10 misconceptions about smart beta
    "(…) The stratospheric rise of smart beta has provoked intense debate in recent years. EDHEC Risk Institute feel much of this debate has been driven by misconceptions about smart beta strategies. The institute has now published a list of the most common misconceptions about smart beta, in three separate areas of smart beta performance and risk. (...) The firm’s analysis shows that more often than not, superficially convincing claims about smart beta strategies are in fact erroneous. Challenging conventional wisdom by reviewing academic literature and empirical evidence, the institute believes, will lead to more balanced conclusions and a more nuanced understanding of the benefits and risks of smart beta strategies. (...)"
    Copyright Funds Europe [Full text - Registration required]


  • ETF.com (20/07/2016)
    Why I Own: Global X Scientific Beta US ETF (SCIU)
    Interview with Patrick Bobbins, Trading and Portfolio Manager, Carroll Financial Associates
    "(...) What do you like about factor-based investing?
    It communicates well to the client. Often, we can buy an active manager, but we're not sure exactly what he does. He might be a growth manager, or a value manager or he might try to achieve low volatility—but at the end of the day, the fund is still up to manager discretion. Buying a factor in its pure form, however, is buying an idea, a concept, a process. Factors give us a pure way to invest in what active management has been screening for, such as value or momentum. And the Global X Scientific Beta US ETF (SCIU), in particular, offers a cheap way to invest in factors; it's just 19 basis points right now.
    Do you use SCIU as a replacement or a supplement to single-factor investing?
    We use it in addition to single-factor investments. We look at SCIU as a good core holding, around which we can form our other factor rotation. It's not market-cap-weighted, but it's still linked to the S&P, so it's a plus to have something factored in to what we already use as an anchor point. So actually, SCIU took a lot of money away instead from the asset-managed funds that we'd held for awhile.
    (...)"
    Copyright ETF.com [Full text]


  • The Asset (14/07/2016)
    Can smart beta ETF gain traction in Asia?
    "(...) “There are two problems with cap weight indices by the nature of distribution of capitalization on the market. First, because large caps are dominant when you weigh your indices based on capitalization you are concentrated into large cap companies. Therefore you are not very well diversified,” says Frederic Ducoulombier, founding director, EDHEC Risk Institute – Asia. “Second, you are tilted toward large companies which tend to be growth companies over the long term and there are some academic studies that find if you tilt toward medium caps, small caps or towards value companies (not growth companies) you are better rewarded. So smart beta has tried to answer these problems,” he adds. A smart beta product that aims diversification can improve the efficiency of a portfolio through better weighting of the stocks and elimination of certain risks. Another type of smart beta product is factor-based ETFs, which enhances portfolio performance by changing the tilts toward factors that harvest risk premia – higher than what the broader market risk premium is over the long term. (...)"
    Copyright Asset Publishing and Research Limited [Full text]


  • Benefits and Pensions Monitor (12/07/2016)
    OPTrust Using Multi-Beta Solution
    "(...) OPTrust is investing in an equity portfolio that is benchmarked to the Scientific Beta Developed Multi-Beta Multi-Strategy Relative Volatility (90 per cent) Solution. One of the characteristics of traditional defensive strategies such as minimum or low volatility is that they are concentrated in low volatility or low beta stocks. Therefore, while over a very long period these defensive strategies outperform cap-weighted indices, over the short term, in a bull market, they could seriously underperform. It is in this context that researchers from EDHEC-Risk Institute and ERI Scientific Beta have developed an approach in terms of multi-factor dynamic defensive strategies. The solution indices are no longer exposed to low volatility factors alone, but obtain a significant reduction in portfolio volatility through factor diversification. Moreover, these new strategies have a variable defensive bias, which corresponds to dynamic allocation between smart factor indices based on market volatility. Noël Amenc, CEO of ERI Scientific Beta, says, “The beauty of ERI Scientific Beta’s dynamic defensive solution is that it is defensive when needed. This is reflected in the dynamic nature of the approach”. (...)"
    Copyright Benefits and Pensions Monitor [Full text]


  • Institutional Asset Manager (12/07/2016)
    OPTrust invests in ERI Scientific Beta solution
    "(...) OPTrust, which invests and manages one of Canada’s largest pension funds, is investing in an equity portfolio that is benchmarked to the Scientific Beta Developed Multi-Beta Multi-Strategy Relative Volatility (90 per cent) Solution. One of the characteristics of traditional defensive strategies such as minimum or low volatility is that they are concentrated in low volatility or low beta stocks. While over a very long period these defensive strategies outperform cap-weighted indices, over the short term, in a bull market, they could seriously underperform. It is in this context that researchers from EDHEC-Risk Institute and ERI Scientific Beta have developed a new approach in terms of multi-factor dynamic defensive strategies. The Scientific Beta Multi-Beta Multi-Strategy relative volatility solution indices are no longer exposed to low volatility factors alone but obtain a significant reduction in portfolio volatility through factor diversification. The new strategies have a variable defensive bias, which corresponds to dynamic allocation between smart factor indices based on market volatility. (...)"
    Copyright GFM Limited [Full text]


  • CBS Moneywatch (07/07/2016)
    Do CEOs lie? Perhaps, but not how you think
    "(...) When publicly traded companies report their quarterly results, executives typically talk with investors on a conference call to update them on the current-quarter and expected business trends. But it turns out that many of those executives may not be telling the truth. Corporate execs tend to downplay their current results and provide more pessimistic forecasts and negative tones even when their companies are experiencing strong sales, according to researchers Kenneth Froot, Namho Kang, Gideon Ozik and Ronnie Sadka, who published their findings with the National Bureau of Economic Research. (...) The researchers, who are from Harvard's Graduate School of Business, University of Connecticut, EDHEC-Risk Institute and Boston College's Carroll School of Management, tapped data from more than 350 million consumer devices to create a sales indicator for 50 retailers, ranging from American Eagle Outfitters (AEO) to Williams-Sonoma (WSM). They found that the data correlated well with the revenue growth reported by the businesses. Yet even when the data indicated that sales in the post-quarter period were strong, executives tended to point investors in the other direction. (...)"
    Copyright CBS News [Full text]


  • Global Investor (04/07/2016)
    Amundi focuses on smart beta education
    "(...) The EDHEC Risk survey, recently published by Amundi, also shows increased interest in smart beta ETF use among institutional investors; almost 70% of respondents invested in such products during 2015. (...) Amundi’s first multi-strategy smart beta ETF, launched in partnership with index provider ERI Scientific Beta, amassed more than €470m ($530m) in assets under management since it was launched in 2014. A similarly-constructed fund covering European equities followed in January 2016. The Scientific Beta Developed Multi-Beta Multi-Strategy ERC index has outperformed the MSCI World index by 4.73% since 2014. (...)"
    Copyright Euromoney Institutional Investor PLC [Full text]


  • Asia Asset Management (July 2016)
    Smart factor investing
    Article by Felix Goltz, Ashish Lodh and Sivagaminathan Sivasubramanian
    "(…) Smart beta equity product offerings have proliferated over the past decade, offering investors ample choice of factors and weighting schemes to select from for a relevant smart beta index. However, in addition to the question of selecting a suitable index as a standalone investment, the question of combining different smart beta strategies arises in the context of an extensive range of smart beta offerings. This article addresses the issue of combining several smart beta strategies, and clarifies the conceptual underpinnings and relevant questions arising when considering smart beta index combinations. (…)"
    Copyright Asia Asset Management [Full text - Registration required]


  • IPE (01/07/2016)
    Derivatives rules raise market-liquidity concerns, EDHEC warns
    "(...) New rules on derivative transactions coming into effect this year raise further concerns about market liquidity, according to EDHEC-Risk Institute. The research institute published a study analysing the forthcoming framework for calculating initial margin (IM) and variation margin (VM) on transactions involving non-cleared over-the-counter (OTC) derivatives. The study highlights how the new requirements on collateral to be put aside as IM on non-cleared OTC derivative transactions may put a further squeeze on much-needed liquidity in high-quality assets, such as government bonds and high-grade corporate bonds. Dominic O’Kane, an affiliate professor of finance at EDHEC Business School and author of the study, said: “There’s a question mark over how much collateral is out there compared with what is going to be required.(…)"
    Copyright IPE [Full text - Registration required]


June 2016

  • Benefits and Pensions Monitor (28/06/2016)
    Model-based Approach Captures Risk
    "(...) The model-based approach is the only framework that correctly captures the counter-party risk presented by non-centrally cleared OTC derivatives, says an EDHEC-Risk Institute publication. ‘Initial Margin for Non-Centrally Cleared OTC Derivatives – Overview, Modelling and Calibration’ provides a detailed overview and analysis of the forthcoming new framework to be used by large financial institutions to determine initial margin (IM) and variation margin (VM) payments when trading non-cleared over-the-counter (OTC) derivatives. It also sets out the modelling requirements specified by the BCBS/IOSCO Working Group on Margin Requirements (WGMR) and discusses modelling implementation issues. In particular, the fact that the framework prevents the risk of assets with multiple market factors from being netted fully is discussed. (...)"
    Copyright Benefits and Pensions Monitor [Full text]


  • Hedge Fund Journal (27/06/2016)
    New margin regulations for non-cleared OTC derivatives
    "(...) In a new publication entitled “Initial Margin for Non-Centrally Cleared OTC Derivatives – Overview, Modelling and Calibration,” EDHEC-Risk Institute provides a detailed overview and analysis of the forthcoming new framework to be used by large financial institutions to determine initial margin (IM) and variation margin (VM) payments when trading non-cleared over-the-counter (OTC) derivatives. (...) The paper provides an overview of the new initial margin (IM) regulations that will come into effect in September 2016. Of the two proposed approaches, it explains why the model-based approach is the only framework that correctly captures the counterparty risk presented by non-centrally cleared OTC derivatives. It also sets out the modelling requirements specified by the WGMR, and discusses modelling implementation issues. (...)"
    Copyright Hedge Fund Journal [Full text]


  • Automated Trader (27/06/2016)
    EDHEC-Risk Institute: New margin regulations for the non-cleared OTC Derivatives to reduce systemic risk
    "(...) In a new publication entitled "Initial Margin for Non-Centrally Cleared OTC Derivatives - Overview, Modelling and Calibration," EDHEC-Risk Institute provides a detailed overview and analysis of the forthcoming new framework to be used by large financial institutions to determine initial margin (IM) and variation margin (VM) payments when trading non-cleared over-the-counter derivatives. The Fédération Bancaire Française (FBF) supports the research chair on "Innovations and Regulations in Investment Banking" in which this research was produced. (...)"
    Copyright Automated Trader Ltd [Full text]


  • aiCIO (27/06/2016)
    When Risk Parity Meets Risk Premia
    "(...) Factor investing may be better suited to constructing risk parity portfolios rather than replicating hedge funds, according to EDHEC-Risk Institute (ERI). Previous studies of factor investing—dubbed “alternative risk factors” by ERI—suggested hedge fund exposures can be broadly replicated by passive products tracking factors such as value or momentum. ERI took issue with this position in a report, finding out-of-sample replication weaker than studies’ in-sample conclusions. “Our results also suggest that risk parity strategies applied to alternative risk factors could be a better alternative than hedge fund replication for harvesting alternative risk premia in an efficient way,” wrote Jean-Michel Maeso, ERI’s quantitative research engineer, and Director Lionel Martellini. “In the end, the relevant question may not be, ‘Is it feasible to design accurate hedge fund clones with similar returns and lower fees?’, for which the answer appears to be a clear negative, but instead, ‘Can suitably designed mechanical trading strategies in a number of investable factors provide a cost-efficient way for investors to harvest traditional but also alternative beta exposures?’,” the authors argued. (...)"
    Copyright Asset International [Full text]


  • Institutional Asset Manager (27/06/2016)
    New margin regulations for the non-cleared OTC derivatives to reduce systemic risk across financial markets
    "(...) EDHEC-Risk Institute has released an overview and analysis of the forthcoming framework to be used by financial institutions to determine initial margin (IM) and variation margin (VM) payments when trading non-cleared over-the-counter (OTC) derivatives. The new publication – Initial Margin for Non-Centrally Cleared OTC Derivatives - Overview, Modelling and Calibration – was produced by the research chair on “Innovations and Regulations in Investment Banking” which is supported by the Fédération Bancaire Française (FBF). Coming into effect in September 2016, this new framework was set out in 2015 and is based on the recommendations of the BCBS/IOSCO Working Group on Margin Requirements (WGMR). This framework has been in development since 2009, and was a response to the events of September 2008 which saw the bankruptcy of Lehman Brothers, the bailout of AIG and the federal takeover of Fannie Mae and Freddie Mac, all of whom had large exposures to the OTC derivatives market. The result of these regulations is that banks must hold initial margin collateral. This is intended to protect banks against any close-out loss on the bilateral set of non-cleared OTC derivatives that they would have with a defaulted counterparty. The paper provides an overview of the new initial margin (IM) regulations that will come into effect in September 2016. (...)"
    Copyright GFM Limited [Full text]


  • ETF Trends (23/06/2016)
    Smart ETFs That Multi-Task By Cutting Risk and Lifting Returns
    "(...) Now, we are seeing growth in the smart-beta “2.0” index-based funds. These ETFs track multi-factor indexing methodologies that rely on multiple empirically rewarded factors and multi-weighting strategies to potentially diminish risk and enhance returns. “It is evident that choosing good factor tilts combined with well-diversified weighting schemes generates attractive risk-adjusted performance, and that combining the different factor tilts allows for further improvement in performance, especially relative risk-adjusted performance,” according to a research note entitled “Comprehensive and Well-Diversified Access to Rewarded Equity Factors: a Six-Factor Smart Beta Strategy,” published in the most recent Pensions & Investments EDHEC-Risk Institute Research for Institutional Money Management supplement. EDHEC-Risk Institute, ERI Scientific Beta researchers pointed to six factors as a useful starting point for smart-beta investments, including low risk, size, value, momentum, profitability and investment. (...)"
    Copyright Global Trends Investments [Full text]


  • AlphaQ (21/06/2016)
    EDHEC-Risk study seeks best approach for harvesting alternative risk premia
    "(...) EDHEC-Risk has published a new study entitled “Factor Investing and Risk Allocation: From Traditional to Alternative Risk Premia Harvesting”, drawn from the Lyxor Asset Management research chair on “Risk Allocation Solutions”. The study extends the analysis of factor investing beyond traditional factors and seeks to investigate what the best possible approach is for harvesting alternative long short-risk premia. The authors write: “There is a growing interest amongst sophisticated institutional investors in factor investing. It is now well accepted that the average long-term performance of active mutual fund managers can, to a large extent, be replicated through a static exposure to traditional factors, which implies that traditional long-only risk premia can be most efficiently harvested in a passive manner.” (...)"
    Copyright GFM Limited [Full text]


  • Financial Investigator (21/06/2016)
    EDHEC-Risk Institute: Risk allocation strategies applied to alternative risk factors could be more relevant than hedge fund replication for harvesting alternative risk premia
    "(...) In a new study entitled “Factor Investing and Risk Allocation: From Traditional to Alternative Risk Premia Harvesting”, drawn from the Lyxor Asset Management research chair on “Risk Allocation Solutions”, EDHEC-Risk extends the analysis of factor investing beyond traditional factors and seeks to investigate what the best possible approach is for harvesting alternative long short-risk premia. There is a growing interest amongst sophisticated institutional investors in factor investing. It is now well accepted that the average long-term performance of active mutual fund managers can, to a large extent, be replicated through a static exposure to traditional factors, which implies that traditional long-only risk premia can be most efficiently harvested in a passive manner. By looking beyond traditional factors, this research does indeed identify other strategies that serve to harvest alternative risk premia. (...)"
    Copyright Financial Investigator Publishers [Full text]


  • Investment Executive (14/06/2016)
    Focus on clients’ goals when deciding investment strategy
    "(...) A growing focus on the goals-based investment process is leading to a change in dialogue between financial advisors and their clients, according to Lionel Martellini, professor of finance at EDHEC Graduate School of Business in Lille, France, who spoke at the Investment Management Consultants Association's annual conference in Toronto on Tuesday. "What we have been doing for a long time as investment managers is we have been very active at talking about ourselves [with clients]," said Martellini, who believes advisors have spent too much time communicating their own success in generating positive returns for clients. The conversation between an advisor and a client instead must focus on the client's goals and prioritizing those goals, according to Martellini, who explained the main elements of a goals-based investment process to the audience of advisors. Specifically, advisors must first understand a client's essential goals and aspirational goals before making any investment recommendations. The essential goals are those that are affordable and securable, such as producing a certain level of replacement income during retirement. Essential goals are the top priority for the advisor, said Martellini. Aspirational goals are secondary objectives and can include increasing a client's current level of wealth. (...)"
    Copyright Transcontinental Media Inc. [Full text]


  • Advisor.ca (14/06/2016)
    Putting goals-based investing to work
    "(...) Investment industry professionals have their priorities backwards. Instead of talking about solving clients’ problems, portfolio managers focus on selling themselves and their records, says Lionel Martellini, professor of finance at EDHEC Business School and senior scientific advisor at ERI Scientific Beta. We need to stop talking about ourselves, and start talking to our clients about what they need, Martellini told the advisors gathered at the Investment Management Consultants Association‘s conference, June 14. Advisors should use clients’ goals to determine how to invest. The first step is to sort those goals into essential and aspirational, based on how much money a client has to invest, and his or her risk tolerance. If money and tolerance were infinite, then there would be no need to distinguish between the two types of goals, says Martellini, but in the real world, advisors must focus on achieving what’s possible with limited resources. In his presentation, he outlined the three factors in goals-based investing: insurance, diversification and hedging, and showed how to use them to achieve both essential and aspirational goals. (...)"
    Copyright Rogers Media Inc. [Full text]


  • Benefits and Pensions Monitor (13/06/2016)
    ERAFP Awards Carbon Mandate
    "(...) One of the most prominent pension schemes in Europe, ERAFP, the €23.5 billion additional pension scheme for French civil servants, is awarding a mandate to asset managers for a euro zone mid- and large-cap listed equities portfolio that will be benchmarked to the Scientific Beta Eurozone Max Sharpe Ratio ERAFP SRI Carbon Efficient index. The EDHEC Risk Institute has been conducting research for several years on the possibility of reconciling financial and environmental performance and the launch of a new series of low carbon indices by ERI Scientific Beta earlier this year marked the practical realization of these research efforts. The mandate must be managed while respecting the socially responsible investing (SRI) principles under which all of ERAFP’s allocations are managed. (...)"
    Copyright Benefits and Pensions Monitor [Full text]


  • Investment Europe (10/06/2016)
    Major European pension scheme to be benchmarked to low carbon index
    "(...) One of the most prominent pension schemes in Europe, the €23.5bn additional pension scheme for French civil servants ERAFP, will benchmark €500m to €1bn euro zone mandate to ERI Scientific Beta low carbon index. The mandate will be awarded for a six-year term and must be managed while respecting the socially responsible investing (SRI) principles under which all of ERAFP’s allocations are managed. (...) The institute has been conducting research for several years on the possibility of reconciling financial and environmental performance. The launch of a new series of low carbon indices by ERI Scientific Beta earlier this year marked the practical realisation of these research efforts. (...)"
    Copyright Open Door Media Publishing Limited [Full text]


  • Funds Europe (10/06/2016)
    EDHEC RESEARCH: Minding the risk budget
    Article by Felix Goltz, head of applied research at the EDHEC-Risk Institute
    "(…) The emergence of smart beta indices is directly linked to the new investment idea of ‘risk allocation’, as Felix Goltz of EDHEC-Risk Institute explains. Cap-weighted indices have been widely criticised in passive investment, but in actual fact, they would be truly optimal if the Capital Asset Pricing Model (CAPM) were true and the indices reflected the true market portfolio. Neither of these conditions is borne out in practice. Such criticism is the starting point for smart beta strategies. There are two angles that can be taken and both correspond to sides of the same coin – the inefficiency of cap-weighted indices (...)"
    Copyright Funds Europe [Full text - Registration required]


  • Institutional Asset Manager (09/06/2016)
    Major European institutional equity mandate to be benchmarked to Scientific Beta low carbon index
    "(...) The EUR23.5 billion additional pension scheme for French civil servants, ERAFP, has announced that it is awarding a mandate to asset managers for a euro zone mid- and large-cap listed equities portfolio worth EUR500 million to EUR1 billion that will be benchmarked to the Scientific Beta Eurozone Max Sharpe Ratio ERAFP SRI Carbon Efficient index. (...) Commenting on this announcement, Noël Amenc, CEO of ERI Scientific Beta, says: “Having announced the launch of our low carbon indices earlier this year, we are gratified that ERAFP has seen fit to award such a significant mandate so soon on the basis of ERI Scientific Beta’s low carbon indices. The low carbon indices produced by ERI Scientific Beta offer access to short and medium-term outperformance by using consensual results from financial research in the area of smart beta and portfolio diversification. The exclusion from the index of the worst firms in terms of carbon intensity in each sector of activity guarantees that these indices have a strong positive impact on the environment.” (...)"
    Copyright GFM Limited [Full text]


  • European Pensions (09/06/2016)
    ERAFP to award €500m to €1bn eurozone equity portfolio mandate
    "(…) The €23.5bn additional pension scheme for French civil servants ERAFP is to award a €500m to €1bn mandate to asset managers for a eurozone mid- and large-cap listed equities portfolio, benchmarked to the Scientific Beta Eurozone Max Sharpe Ratio ERAFP SRI Carbon Efficient index. The mandate will be awarded for a six-year term and must be managed while respecting the SRI principles under which all of ERAFP’s allocations are managed. “The low carbon indices produced by ERI Scientific Beta offer access to short and medium-term outperformance by using consensual results from financial research in the area of smart beta and portfolio diversification," ERI Scientific Beta CEO Noël Amenc said. (…)"
    Copyright European Pensions [Full text]


  • Funds Europe (09/06/2016)
    France’s ERAFP makes €1bn smart beta allocation
    "(…) ERAFP, a €23.5 billion pension scheme for French civil servants that invests heavily in socially responsible investment (SRI) mandates, is to invest between €500 million and €1 billion in a smart beta, low carbon strategy. The investment will be split between asset managers and invested for a six-year term, according to ERI Scientific Beta, a branch of the EDHEC-Risk Institute in France which has constructed the index for ERAFP. The investment will be in Eurozone mid- and large-cap listed equities and benchmarked to the Scientific Beta Eurozone Max Sharpe Ratio ERAFP SRI Carbon Efficient index. Noël Amenc, chief executive of ERI Scientific Beta, said the mandate represented a “major vote of confidence” in the index provider. (...)"
    Copyright Funds Europe [Full text - Registration required]


  • Financial Investigator (09/06/2016)
    ScientificBeta: Major European institutional equity mandate to be benchmarked to Scientific Beta low carbon index
    "(...) One of the most prominent pension schemes in Europe, the €23.5bn additional pension scheme for French civil servants, ERAFP, has announced that it is awarding a mandate to asset managers for a euro zone mid- and large-cap listed equities portfolio worth €500 million to €1 billion that will be benchmarked to the Scientific Beta Eurozone Max Sharpe Ratio ERAFP SRI Carbon Efficient index. The decision by ERAFP is a major vote of confidence in ERI Scientific Beta, the smart beta index provider set up by EDHEC Risk Institute in 2012. EDHEC Risk Institute has been conducting research for several years on the possibility of reconciling financial and environmental performance and the launch of a new series of low carbon indices by ERI Scientific Beta earlier this year marked the practical realisation of these research efforts. (...)"
    Copyright Financial Investigator Publishers [Full text]


  • Barron's (04/06/2016)
    Smart Beta Gets Smarter Pricing
    "(…) Last week, ERI Scientific Beta implemented a “pay for what you get” pricing option for its institutional clients. Those that sign on will pay zero fixed management fees based on assets; instead, they would pay only when a proprietary index beats a traditional market-cap-weighted one. When it does, ERI Scientific Beta—the smart-beta offshoot of the nonprofit EDHEC-Risk Institute, an investment-focused academic organization—will levy performance fees of 20% of the excess return. (...) Marc Zieger, ERI Scientific Beta’s head of North American business development, told Barron’s that the pricing structure reflects the “robustness” of the firm’s flagship “multibeta multistrategy” methodology. This approach, like others on the market, aims to capture market-beating “factors” found in academic research to beat the market over time; these well-known anomalies include value, momentum, low volatility, and small size. (...) More grandly, EDHEC says its pricing aspires to shine a light on smart beta’s opportunity costs—namely, that these strategies can lag behind the benchmark, sometimes for long periods. Lower management fees are good news, of course, since research shows fees are the best predictor of future fund returns. Beyond management fees, though, Zieger says that “hidden costs” of smart beta accrue when certain factors trail the market. Such bouts of weak performance can tempt investors to unload their holdings before they can prove their worth. (...)"
    Copyright Barron's [Full text]


  • ETF Strategy (03/06/2016)
    ERI Sci Beta indices surpass $10bn in tracking assets
    "(...) Assets tracking the indices of smart beta index provider ERI Scientific Beta, a commercial venture of EDHEC Risk Institute, has reached the $10bn milestone. Part of these tracking assets can be attributed to a range of exchange-traded funds that harness the group’s multi-beta multi-strategy indices, including ETFs from providers such as Morgan Stanley, ETF Securities, Amundi and Global X Funds. In terms of geographical distribution, as of 2 June 2016 the $10.3bn of total tracking assets are located in North America (59%), Europe (35%) and Asia-Pacific (6%). (...)"
    Copyright ETF Strategy Ltd [Full text]


  • L'Agefi Suisse (03/06/2016)  
    ERI Scientific Beta: percée des investissements dans le smart beta 2.0
    "(...) Les actifs investis dans les fonds négociables en bourse (exchange-traded funds), ETF, répliquant les indices alternatifs développés par l’ERI Scientific Beta (EDHEC-Risk Institute) s’élèvent à 10,3 milliards de dollars. (...)"
    Copyright L'Agefi Suisse [Full text - French - Registration required]


  • L'Agefi Hebdo (02/06/2016)  
    Une formule de tarification unique pour le « smart beta »
    "(…) « See and pay ». ERI Scientific Beta, le fournisseur d’indices smart beta dépendant de l’EDHEC Risk Institute, a lancé une structure de commissions innovante offrant aux investisseurs le choix de payer soit les frais habituels au prorata des actifs sous gestion, soit des frais variables (a priori de 20 %) en fonction de la surperformance de ces indices smart beta, pondérés par d’autres critères que la capitalisation, par rapport aux indices « capipondérés » de référence. Cette formule de tarification unique témoigne de la confiance du fournisseur d’indices smart beta 2.0 pondérés selon divers facteurs (volatilité, valeur, momentum, taille...) à générer de la surperformance. (…)"
    Copyright Agefi Hebdo [Full text - Registration required]


  • aiCIO (01/06/2016)
    How Much Should Smart Beta Cost?
    "(...) Investors should only pay for factor-based indexes if they prove they are superior to traditional cap-weighted benchmarks—so says EDHEC Risk Institute (ERI). ERI Scientific Beta, the nonprofit’s smart beta index provider, has introduced a new pricing model for its benchmarks that it claims will “disrupt the traditional model of fixed fees.” (...) Amenc was bullish in his group’s ability to make this fee approach stick. Speaking to journalists in London last week, he pointed to ERI’s well-established business, which has $10 billion of assets linked to its indexes. “The fixed costs are already paid,” Amenc said, adding that ERI’s nonprofit status meant it was not required to take more in charges than necessary. Replication costs are “probably nothing,” he argued, meaning the implementation of a service should be the only thing for which clients pay. “We are aligning remuneration with the promise of outperformance, and affirming our confidence in the robustness of our indexes,” Amenc said. (...)"
    Copyright Asset International [Full text]


May 2016

  • ETF Strategy (31/05/2016)
    ERI Sci-Beta launches new pricing scheme for flagship indices
    "(...) Smart beta index provider ERI Scientific Beta has announced a fresh approach to index pricing that may disrupt the traditional model of fixed fees on assets under management. The offshoot of EDHEC Risk Institute will launch a new pricing scheme that enables investors to relate their fees directly to smart beta index performance. Investors will be able to request a pure performance fee structure that levies charges only if the index has actually outperformed the cap-weighted benchmark. This option will be made available from 1 June 2016, whereby those who subscribe to the alternative fee structure will pay zero fixed fees and will only pay variable fees if the flagship Scientific Beta Multi-Beta Multi-Strategy indices outperform their reference cap-weighted index. (...)"
    Copyright ETF Strategy Ltd [Full text]


  • Investment Week (30/05/2016)
    Contrarian Investor: Time to pay for what investors get with smart beta?
    "(...) Rewarding performance
    The good news is this is exactly what is being promised by the academic pointy heads at Scientific Beta, the smart beta index provider offshoot of EDHEC Risk Institute. This relatively new index provider has just announced what it calls "a revolutionary pay for what you get" approach to index pricing that will disrupt the traditional model of fixed fees on assets under management and enable investors to relate their fees directly to smart beta index performance. According to Noël Amenc, CEO of ERI Scientific Beta, the rationale for this mandate offer is that "smart beta providers' claims on the quality and robustness of their strategies should materialise in their live performance". It is also worth observing EDHEC scores very highly in the transparency department with all their indices explained in fastidious detail. Hopefully, this idea of performance by results begins to catch on in the index space among EDHEC's competitors.
    (...)"
    Copyright Incisive Business Media (IP) Limited [Full text]


  • Money Management (30/05/2016)
    Pay for what you get
    "(...) Smart beta index provider, ERI Scientific Beta, has launched their "pay for what you get" approach to index pricing, to disrupt the traditional fixed fee structure on assets under management (AUM). Investors who choose the Scientific Beta Multi-Beta Multi-Strategy index from 1 June will pay zero fixed fees, and will only pay variable fees if the option outperforms the reference cap-weighted index. (...) The firm said it was a pure performance fee mandate as part of its investor-friendly approach which has attracted more than US$10 billion in assets under replication for its smart beta indices in three years. (...)"
    Copyright Cirrus Media [Full text]


  • L'Agefi Suisse (30/05/2016)  
    Smart beta sur la base de la performance
    "(...) ERI Scientific Beta (EDHEC Institute) propose un modèle de coûts remettant en cause l’approche traditionnelle basée sur les actifs sous gestion. Jusqu’ici, l’industrie de la gestion d’actifs facture les frais de gestion sur la base d’un pourcentage fixe calculé directement sur les actifs sous gestion. Ce, quelle que soit la performance du fonds... (...)"
    Copyright L'Agefi Suisse [Full text - French - Registration required]


  • Global Investor (27/05/2016)
    Smart Beta index provider to do away with fixed fees
    "(...) ERI Scientific Beta, the EDHEC Risk Institute’s offshoot smart beta index provider, has announced the launch of a performance based pricing plan for its indexes, the first of its kind worldwide according to the firm. The non-profit organisation is offering the new pricing plan as an alternative to traditional fixed fees on AUM levied by smart beta providers. According to the firm, the offering involves a pure performance fees mandate which investors can opt into from 1 June 2016 if they wish to only pay fees if the index actually outperforms the reference cap-weighted index. "Our rationale for this mandate offer is that smart beta providers’ claims on the quality and robustness of their strategies should materialise in their live performance," said Noël Amenc, CEO of ERI Scientific Beta. "ERI Scientific Beta’s initiative is intended to provide consistency between the smart beta provider’s revenues and the quality of its offering." (...)"
    Copyright Euromoney Institutional Investor PLC [Full text]


  • IPE (27/05/2016)
    ERI Scientific Beta drops flat fee for index, predicts industry-wide change
    "(...) ERI Scientific Beta is to stop charging clients a fixed fee for use of its smart beta indices in a move the provider hopes will reshape the market. Noël Amenc, chief executive at ERI Scientific Beta, argued there was no business risk associated with its decision to move away from a flat fee to a single performance-based charge from the beginning of June. But he said he did expect a pushback from the industry. Amenc predicted that rivals would seek to discredit the approach, by claiming ERI’s indices would achieve greater outperformance by taking on greater investment risk, or call on regulators to “block” its new fee structure. “We are basing this pricing scheme on a {reference} index that has a lower volatility than the cap-weighted {index},” he said, stressing the not-for-profit entity owned by the EDHEC Business School would not be changing the methodology behind the reference portfolio. “Yes, we are putting pressure {on the market},” Amenc added, although he did not anticipate an immediate change in charges levied by other providers. (…)"
    Copyright IPE [Full text - Registration required]


  • Fund Strategy (27/05/2016)
    ERI Scientific Beta launches fixed fee-free smart beta pricing
    "(...) ERI Scientific Beta has announced it will next month launch performance fee-only pricing for its smart beta indices. The smart beta index provider says the no-fixed fees approach to smart beta will be the first of its kind in the world. Its flagship Scientific Beta Multi-Beta Multi-Strategy indices have outperformed their cap-weighted equivalent by 4.51 per cent on average over three years. ERI Scientific Beta chief executive Noël Amenc says: “Our rationale for this mandate offer is that smart beta providers’ claims on the quality and robustness of their strategies should materialise in their live performance. “ERI Scientific Beta’s initiative is intended to provide consistency between the smart beta provider’s revenues and the quality of its offering.” (...)"
    Copyright Centaur Communications Ltd [Full text]


  • ETF Express (27/05/2016)
    Pay for what you get offer from ERI Scientific Beta
    "(...) ERI Scientific Beta, the smart beta index provider offshoot of EDHEC Risk Institute, has launched a “pay for what you get” approach to index pricing that will disrupt the traditional model of fixed fees on assets under management and enable investors to relate their fees directly to smart beta index performance. The non-profit academic institution writes that it seeks to provide the best research with favourable conditions to allow investors to invest in the best conditions possible. “That is how ERI Scientific Beta made EDHEC Risk Institute’s foundational pledge of transparency a reality. This transparency enabled the risks and robustness of strategies whose performance is essentially made up of simulated track records to be challenged. As such, all the data on ERI Scientific Beta’s flagship Scientific Beta Multi-Beta Multi-Strategy indices, with the notable inclusion of historical composition, has been made available to investors without restriction. “The new pricing proposition is part of ERI Scientific Beta’s investor-friendly approach which has enabled it to attract more than USD10 billion in assets under replication for its smart beta indices in three years.” (...)"
    Copyright GFM Limited [Full text]


  • Portfolio Adviser (25/05/2016)
    Smart beta provider ERI to abolish fixed management fees
    "(...) In an unprecedented move, ERI Scientific Beta, a provider of smart beta indices that is an offshoot of the EDHEC Risk Institute in France, today announced it will offer its mandate clients the option to only pay performance fees. From the 1st of June, clients will get the option to pay zero fixed fees and a performance fee of 20% on all outperformance the EDHEC indices achieve compared to their cap-weighted counterparts. Though EDHEC predicted its move “will disrupt the traditional model of fixed fees on assets under management”, it expects existing mandate clients will not take up the offer. “We will propose this new option to all our clients, but they have all had outperformance [over the past three years]. So they will probably not sign up for the zero fixed fees model,” said Noël Amenc, CEO of ERI Scientific Beta. The new pricing model is targeted at attracting new clients instead, as ERI hopes the option of zero fixed fees will convince prospective clients to test the waters of smart beta. “Large numbers of asset owners stay out of smart beta because they think fees are too high for a product that is perceived as passive,” Amenc explained. (...)"
    Copyright Last Word Media Limited [Full text]


  • Investment Europe (26/05/2016)
    Smart beta provider aims to disrupt industry with new fee structure
    "(...) Scientific Beta, the smart beta index provider that has come out of academic work done by EDHEC Risk Institute, has launched an aggressive challenge to the sector by announcing that it will offer investors the option of paying fixed fees or fees based on the performance of its indices. Introducing the new model, Noël Amenc, CEO of ERI Scientific Beta said it came in response to a number of failures that it sees in the traditional approach to charging that is being pursued by other index providers in the market. Although it may be the case that fees have continued to fall because of competition across the industry, they are not necessarily benefitting the end investors because of the nature of performance variations that are possible from smart beta – because of the different methodologies used to develop the indices. (...)"
    Copyright Open Door Media Publishing Limited [Full text]


  • ETF Strategy (23/05/2016)
    Global X smart beta ETFs outperform benchmarks after one-year
    "(...) All four smart beta exchange-traded funds from New York-based ETF provider Global X Funds have surpassed their market cap-weighted benchmarks one year after their initial launch. The ETFs, which provide core multi-factor (value, size, momentum and volatility) equity exposure to the US, Europe, Japan, and Asia ex-Japan through tracking EDHEC-Risk Institute’s Scientific Beta Indices, all outperformed their benchmarks on both return and risk metrics. (...) “We fully believe that multi-factor funds are the latest evolution in smart beta investing,” added Jacobs. “The rigorous research put into these strategies, combined with the low fees and increased tax efficiency associated with ETFs, represents an attractive alternative to expensive actively managed mutual funds.” (...)"
    Copyright ETF Strategy Ltd [Full text]


  • ETF Express (19/05/2016)
    Global X Funds' Scientific Beta Suite of Multi-factor ETFs outperform benchmarks at one-year anniversary
    "(...) Global X Funds’ suite of four Scientific Beta ETFs have all outperformed their market cap-weighted benchmarks, with lower realised volatility, since their launch on 12 May, 2015. Of the four geographic regions, the Global X Scientific Beta Japan fund demonstrated the most outperformance, beating the MSCI Japan Index by over 11 per cent since the fund's inception. "One year in, we're pleased to say that these academically-driven funds have made a mark, with all four outperforming their benchmarks with less volatility," says Jay Jacobs, director of research of Global X. The ETFs, tracking the EDHEC-Risk Institute's Scientific Beta Indexes, provide core equity exposure to the US, Europe, Japan, and Asia ex-Japan. The funds seek to outperform market cap-weighted indexes and mitigate unrewarded risks at lower fees than most actively managed funds. (...)"
    Copyright GFM Limited [Full text]


  • ETFdb.com (17/05/2016)
    Exclusive Q&A With the CEO of Global X and the Global Head of ETF Solutions for J.P. Morgan
    "(...) Global X will continue to focus on adding value through its funds, research, and support of our clients’ investment process. We offer an institutional quality core at a very low cost through our Scientific Beta family. These funds have provided significant excess return relative to market cap-weighted indexes since inception about a year ago, at significantly lower volatility. We will continue to grow this family beyond the current developed-market funds (U.S., Europe, Japan and Asia ex-Japan) to also cover emerging markets. (...)"
    Copyright Mitre Media [Full text]


  • Fund Strategy (12/05/2016)
    Which ETFs offer the best Japan exposure?
    "(...) An equity index tracker could provide a simple way of following Japanese stocks, and there are plenty of these available (...). A slightly more exotic ETF would be one such as the Global X Scientific Beta Japan ETF, which looks to shift some of its exposure away from underperforming large-cap stocks and towards the mid-cap end of the spectrum. Such an ETF has also seen lower volatility than the simple trackers, which may prove attractive for some. (...)"
    Copyright Centaur Communications Ltd [Full text]


  • Pensions & Investments (11/05/2016)
    EDHEC Business School adds finance professor
    "(...) Riccardo Rebonato joined EDHEC Business School as professor of finance, and also became a member of the EDHEC-Risk Institute, said a spokeswoman for the academic institution. It is a new position, Mr. Rebonato, who started earlier this month, is an expert in interest-rate-risk modeling and management and will strengthen EDHEC’s fixed-income expertise, said Lionel Martellini, director of EDHEC-Risk Institute, in a news release. “Fixed-income investing is a strategic area of development for our institute, with a number of increasing relevant questions for investors, including smart harvesting of interest rate and credit risk premia, the impact of a zero-interest-rate environment on bond portfolio management, or efficient interest-rate-risk management in retirement investing solutions,” Mr. Martellini added. (...)"
    Copyright Pensions & Investments [Full text - Registration required]


  • HedgeWeek (11/05/2016)
    Professor Riccardo Rebonato joins EDHEC-Risk Institute
    "(...) Professor Riccardo Rebonato, a specialist in interest rate risk modelling with applications to bond portfolio management and fixed-income derivatives pricing, has joined EDHEC-Risk Institute. He has also joined the EDHEC Faculty. (...) Professor Lionel Martellini, Director of EDHEC-Risk Institute, says: “We are truly delighted to welcome Riccardo to our team. A world leading expert in interest rate risk modelling and management, he will further strengthen our expertise in fixed-income securities, a subject already covered at EDHEC-Risk Institute by Professors Frank Fabozzi and Dominic O’Kane, as well as Research Director, Vincent Milhau. Fixed-income investing is a strategic area of development for our institute, with a number of increasing relevant questions for investors, including smart harvesting of interest rate and credit risk premia, the impact of a zero-interest rate environment on bond portfolio management, or efficient interest rate risk management in retirement investing solutions.” (...)"
    Copyright GFM Limited [Full text]


  • IPE (11/05/2016)
    Wednesday people roundup
    "(…) EDHEC-Risk Institute – Riccardo Rebonato has joined the institute from PIMCO, where he was global head of rates and FX research. Rebonato, who will also join the EDHEC Business School’s faculty, has previously worked at Royal Bank of Scotland, where he was head of front-office risk management and head of client analytics, as well as head of derivatives research at Barclays Capital. (…)"
    Copyright IPE [Full text - Registration required]


  • Investment Europe (11/05/2016)
    Former Pimco rates and fixed income head joins EDHEC-Risk institute
    "(...) The EDHEC-Risk Institute has announced former Pimco’s global head of Rates and FX Research Riccardo Rebonato has joined the institution as well as the EDHEC faculty. Previously, he also held a number of positions at Royal Bank of Scotland including head of Front Office Risk Management and head of Clients Analytics, global head of Market Risk and global head of Quantitative Research. Prior to joining RBS, he was head of Complex IR Derivatives Trading and head of Derivatives Research at Barclays Capital. Rebonato served on the board of ISDA (2002-2011), and has been on the Board of GARP since 2001. (...)"
    Copyright Open Door Media Publishing Limited [Full text]


  • Seeking Alpha (10/05/2016)
    Smart Beta And The Portfolio Construction Puzzle
    "(...) Hence R&D of institutional investors, index providers and ETF manufacturers alike has focused more on "smart beta." This has triggered a slew of innovation - both superficial and substantive. At a superficial end, age-old alternative weighting strategies (e.g. value indices that screen stocks for low book values, or dividend-weighted indices) have been re-branded as being "smart." In these cases, for "smart" read "non-market-cap weighted." In fairness, this rebranding is part of broadening of alternative weighting strategies that are factor-based. More substantively, research programs such as EDHEC-Risk Institute's Scientific Beta have been instrumental in promoting fresh thinking in the field of both factor-based and risk-based smart beta strategies. (...)"
    Copyright Seeking Alpha [Full text]


  • IPE (May 2016)
    EDHEC European ETF Survey 2015 – some key results
    "(…) EDHEC Risk Institute conducted its ninth survey of European investment professionals on the usage and perceptions of ETFs at the end of 2015 with the support of Amundi ETF, Indexing & Smart Beta. EDHEC-Risk Institute’s ETF surveys now provide a continuous assessment of practices and views amongst professional investors since 2006. Our results are based on the responses of 219 European investment decision-makers, among which 180 use ETFs. The survey respondents were from 25 different countries, with more than half (52%) located in the UK, Switzerland or Italy. Institutional investment managers made up the majority of respondents in the study, with 76%, and participating organisations together have assets under management of at least €3.1trn. (…)"
    Copyright IPE [Full text - Registration required]


  • Financial News (05/05/2016)
    Pimco rates and FX head switches to academia
    "(...) Pimco's global head of interest rate and foreign exchange analytics has left for a role at a French business school, marking the latest senior departure in recent months from the $1.5 trillion US bonds giant's London office. (...) Riccardo Rebonato, a rates and analytics specialist with more than 27 years of investment experience, has left the bond manager, where he had been an executive vice-president, to become a professor at the renowned French business school EDHEC. He left Pimco on April 26, according to a person familiar with the situation. A spokeswoman for EDHEC confirmed he joined on May 3 and is a professor in London. Rebonato has penned several financial and political books including Plight of the Fortune Tellers, about attitudes to financial risk management, and Taking Liberties: A Critical Examination of Libertarian Paternalism. (...)"
    Copyright Financial News [Full text - Registration required]


  • ETF Trends (05/05/2016)
    Limit Risks and Diversify with Multi-Factor, Smart-Beta ETFs
    "(...) Exchange traded funds (ETFs) that implement smart-beta strategies help investors move away from traditional market-cap methodologies to generate better returns without paying for the high costs associated with an active manager. On a recent webcast, How Smart Beta is Getting Smarter and Why Advisors Should Pay Attention, Eric Shirbini, Global Product Specialist at ERI Scientific Beta, highlighted some shortcomings associated with market cap-weighted index funds, including a tilt toward unrewarded factors and low level of diversification, which may lead to less desirable risk-adjusted returns. Consequently, fund providers have worked with indexers to create smart-beta indices to address the problems. In the beginning, we saw so-called smart-beta 1.0 solutions, or strategies with a single factor tilt, like value or equal weight. Now, the industry has come out with smart-beta “2.0” indices that utilize factors based on well established empirically rewarded factors and multi-weighting strategies that weight components to maximize diversification. (...)"
    Copyright Global Trends Investments [Full text]


  • ETF Trends (04/05/2016)
    The Best Strategy to Implement Smart-Beta ETFs into Portfolios
    "(...) Smart-beta or alternative index-based exchange traded fund (ETF) strategies have quickly gained traction among financial advisors and investors seeking to enhance portfolio returns or smooth out their investment ride. On a complimentary webcast this Thursday, How Smart Beta is Getting Smarter and Why Advisors Should Pay Attention, Eric Shirbini, Global Product Specialist at ERI Scientific Beta, Joe Smith, Senior Market Strategist at, CLS Investments, and Mike Cameron, Head of Institutional Sales of ETF Securities, look at the smart-beta landscape and help outline better investment opportunities through alternative index-based investments. (...) 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. (...)"
    Copyright Global Trends Investments [Full text]


April 2016

  • Risk.net (22/04/2016)
    Investors overlooking smart beta tracking errors, say experts
    "(...) Smart beta investors might be underestimating tracking errors and maximum relative drawdown in their indexes when compared with the broader market, according to industry experts. Annualised extreme tracking errors relative to a cap-weighted index can range from between 4% to 18% for different smart beta strategies, thinks Eric Shirbini, London-based global product specialist at EDHEC Risk Institute's Scientific Beta index provider. "These are massive risks that people are taking and they are not well documented when people replace their active managers with these smart beta strategies," said Shirbini, speaking at a recent EDHEC Risk conference. He calculates that one-year rolling tracking errors at the ninety-fifth percentile ranged from 3.9% for one quality-focused equity index to 18% for one maximum diversification index, in relation to a cap-weighted index of 2,000 developed-world equities over 10 years. (...)"
    Copyright Incisive Media Investments Limited [Full text - Registration required]


  • FT Adviser (20/04/2016)
    Guide to smart beta
    "(...) ERI Scientific Beta’s own research, called ‘Smart Beta is not Monkey Business’, claims smart beta-style constructed indices do not just randomly beat traditional market performance, nor could a monkey generate similar performance through a random selection of stocks. Instead, the ERI paper used test portfolios following particular methodologies for constructing indices. Far from being random, smart beta-style portfolios which were constructed with a careful assessment of investment philosophy and index design would indeed help your customers achieve their goals. (...)"
    Copyright The Financial Times Ltd [Full text]
    Advantages of using smart beta strategies
    "(...) By using smart beta, investors can gain exposure to their desired index, without suffering as a result of correlation to the index performance. Eric Shirbini, global product specialist for ERI Scientific Beta, says one key advantage is better performance than a standard cap-weighted index for the same level of risk, but said investors needed to have a longer time frame in mind. He explains: “It is important to point out this improvement in performance will only materialise over a long time horizon.” (...) There’s also the benefit of diversification across multiple factor smart-beta products, rather than sticking to just one strategy, as Mr Shirbini points out: “The performance improvement for smart multi-beta products comes sooner than for a smart beta index only exposed to a single factor.” (...)"
    Copyright The Financial Times Ltd [Full text]
    How to use smart beta for retail clients
    "(...) For Eric Shirbini, global product specialist for ERI Scientific Beta, the killer argument for smart beta is cost. He says: “Advisers need to inform their clients smart beta is a more cost-effective means of generating better performance than the market cap-weighted index, compared with actively managed portfolios.” (...)"
    Copyright The Financial Times Ltd [Full text]
    What’s in a name?
    "(...) These can be called ‘fundamentals’ or ‘factors’ or ‘tilts’ or even ‘style’ – but basically these rules will be applied to the construction of an index, or an index-tracking product such as an exchange-traded fund. Says Eric Shirbini, global product specialist for ERI Scientific Beta, “Smart beta is an index constructed with clearly defined and transparent rules”. (...)"
    Copyright The Financial Times Ltd [Full text]


  • Top 1000 Funds (20/04/2016)
    Analysing Smart Beta Performance Drivers
    Article by Felix Goltz and Jakub Ulahel, ERI Scientific Beta
    "(...) The ongoing debate on smart beta strategies has led to a number of misconceptions. In a recent paper in the 2016 Journal of Index Investing, Smart Beta is not Monkey Business, Noel Amenc, Felix Goltz and Ashish Lodh analyse some of these misconceptions. In this article, we provide a summary of selected results concerning the sources of outperformance of such strategies. (...)"
    Copyright Conexus Financial Pty Ltd. [Full text]


  • Financial Advisor (18/04/2016)
    At Global X, Smart Beta Means Doing Your Homework
    "(...) Global X, a New York-based fund manager, has taken an entirely different approach—creating a bundle of indexes based on individual factors based on academic metrics, then combining those indexes into funds that encompass multiple factors and weighting approaches. As a result, Global X’s Scientific Beta suite of ETFs addresses several shortcomings in many smart beta funds through strategies designed using research from the EDHEC-Risk Institute, a French financial research and education institution. (...) The concept is simple, says Eric Shirbini, global product specialist at EDHEC-Risk Institute’s Scientific Beta division in London—it is to create indexes that give investors exposure to market risk and returns, or beta, plus an additional risk premium. “Academic research has shown that there are some risk premiums that provide a return over and above the market average,” Shirbini says. “By taking exposure to certain risks, you can get higher returns than the market. That’s what factor investing is all about.” Global X’s indexes represent value, size, momentum and volatility premiums, all of which have produced returns over and above the market in academic research.(...)"
    Copyright Charter Financial Publishing Network Inc. [Full text]


  • Funds Europe (18/04/2016)
    SPONSORED FEATURE: Focusing on factors
    "(…) Amundi is a pioneering force in the smart beta market. The firm’s specialist analysis of market dynamics has resulted in the development of a range of solutions that can deliver superior risk/return profiles than those offered by traditional cap-weighted solutions. (...) “According to an EDHEC-Risk survey, 75% of respondents think smart beta indices provide significant potential to outperform cap-weighted indices in the long term, and 81% avoid cap-weighted indices that are concentrated in very few stocks or sectors.” (...) “Our clients can duplicate every existing smart beta index issued by major providers, and utilise both single and multi-factor approaches. For example, we recently launched an innovative Multi-smart beta European equities ETF, which replicates the Scientific Beta Extended Developed Europe Multi-Beta Multi-Strategy ERC index. This new strategy ETF strengthens our Smart Beta equity range following the success of our global Multi Smart Beta exposure launched in 2014. (...)"
    Copyright Funds Europe [Full text - Registration required]


  • Le Revenu (18/04/2016)  
    L'irrésistible ascension de la gestion indicielle
    "(...) Un sondage récent effectué par EDHEC-Risk auprès de 180 utilisateurs européens d’ETF a montré, souligne State Street Global Adivsors, que «les considérations en matière de coûts semblent être le principal moteur de la hausse des allocations aux ETF (80%), loin devant la performance (50%), la transparence (46%) et la liquidité (45%)». (...)"
    Copyright Le Revenu [Full text - French]


  • Financial News (14/04/2016)
    Fund managers look to go ‘smart neutral’
    "(...) Market-neutral interests Willis Towers Watson because of the precise way it can balance out factors. A long position in value, for example, could be twinned with a short position in growth, or non-value, producing an enhanced growth factor bet, as well as a zero market exposure. Optimisers can be used to strip out other factors including, say, a dominant currency exposure. Tindall said: "It doesn't have to be an optimiser per se, but you would look to reduce the impact of exposures that don't add much value. For example, you could balance longs and shorts in each sector or country. Felix Goltz, director of research at ERI Scientific Beta, did not deny the strategy's potential. But he added that investors needed to understand the issues involved. (...)"
    Copyright Financial News [Full text - Registration required]


  • CNN Money (06/04/2016)
    A Japan ETF To Remember
    "(…) Off the beaten path, investors could be doing significantly less bad with another Japan ETF, which could be a sign that when stocks in Asia's second-largest economy rebound, this ETF will be a leader. That ETF is the Global X Scientific Beta Japan ETF (NYSE: SCIJ). (...) SCIJ, which debuted in May 2015, follows the Scientific Beta Japan Multi-Beta-Strategy Equal Risk Contribution Index. That benchmark provides investors exposure to multiple investment factors, including low volatility, momentum, size and value. “Since 2014, Scientific Beta’s multi-factor approach to Japan has resulted in better performance, lower volatility, and lower drawdowns than both the hedged and unhedged versions of the MSCI Japan Index,” said Global X in a recent research note. (…)"
    Copyright Cable News Network [Full text]


  • Modern Investor (06/04/2016)
    It's time for more insourcing and factor investing, says Evli's CIO
    "(…) When outsourcing, three things are of great importance: a high active share, good relative three-year performance and low correlation to proven factors like value, small cap, quality. A new cooperation partner worth mentioning is EDHEC-Risk Institute’s ERI Scientific Beta in France. They have made very rigid and ground breaking work in factor investing and we use their indices when building our factor exposure in Europe. (…)"
    Copyright moderninvestor.com [Full text]


  • Private Wealth Canada (04/04/2016)
    ‘Monkey Portfolio’ Claims Rejected
    "(...) ERI Scientific Beta has rejected the claims of ‘monkey portfolio’ proponents who argue not only that all smart beta strategies generate positive value and small cap exposure, which fully explains their outperformance, but also that similar results are obtained by any random portfolio strategy, including the inverse of such strategies. In its research, ‘Smart Beta is not Monkey Business,’ it looks at these claims using test portfolios which follow commonly-employed methodologies for explicit factor-tilted indices. The results directly invalidate all of the above claims. In particular, the results show that many smart beta strategies display exposure to factors other than value or small cap, as well as pronounced differences in factor exposures across different strategies. The ‘monkey’ label comes from the idea that a monkey would be able to generate similar performance through a random selection of stocks. (...)"
    Copyright Private Wealth Canada [Full text]


  • IPE (April 2016)
    SPECIAL REPORT: FACTOR INVESTING
    Portfolio Construction: Calculated risks
    "(…) The idea behind factor investing is simple yet persuasive. To the extent that rewarded and unrewarded risks in financial markets can be successfully distinguished, investors should minimise portfolio exposure to unrewarded ones. This, in turn, should enhance long-term returns. Felix Goltz, head of applied research at EDHEC-Risk Institute emphasises the importance of the distinction between the two types of risk – rewarded and unrewarded. He explains: “There are some risks that are not easy to diversify away from. By taking exposure to these risks, a portfolio may experience losses at certain times, but the investor is rewarded for that exposure in the long term.” (...) But what are examples of risks that are not rewarded systematically in financial markets? The best example is stock-specific risk, according to Goltz, as it can be cancelled out by not investing in that stock. Because of that possibility to diversify away that risk, investors should not assume they will be rewarded for holding it. (…)"
    Copyright IPE [Full text - Registration required]
    Factor investing: Pension funds in two minds
    "(…) “Compared with active managers, factor investing is more rules-based and transparent than active management, hence significantly more cost-effective,” says Eric Shirbini, global product specialist at ERI-Scientific Beta. “Yet it delivers around 85% to 90% of the outperformance of active managers. It also means you don’t have to try and find the best active managers, especially that rarity who outperforms the market.” He adds that, while asset managers’ fees are all-inclusive, so hard to break down, investors know how much they are being charged for the factor index itself (that is, the intellectual property) and, separately, the trading costs. This, he says, will put downward pressure on costs. (...) Shirbini says pension funds are using factor investing to replace underperforming active managers when their mandate expires. “When they do that, it’s important not to invest in a single factor, because losses will hit you at some point in the cycle,” he says. “So they invest in a portfolio of factors, using a multi-factor index.” He adds that another popular route is to use low-volatility factors in defensive strategies, investing in stocks such as utilities and consumer defensive stocks.(…)"
    Copyright IPE [Full text - Registration required]
    Index Providers: Benchmark bonanza
    "(…) Research is also at the heart of EDHEC-Risk Institute which, three years ago, caused a stir with its paper, Smart Beta 2.0, that criticised the first generation of products for presenting systematic and specific risks that were neither documented nor explicitly controlled by their promoters. To rectify the problem, EDHEC-Risk recommended that the choice of systematic risk factors for smart beta benchmarks should be explicit, and made by the investor, not the index promoter, according to Felix Goltz, director of research at ERI Scientific Beta and one of the authors of the paper. EDHEC-Risk, which has about $8bn (€7.4bn) tracking its strategies, launched the Scientific Beta Developed Multi-Beta Multi-Strategy index which blends four stock-selection factors (volatility, valuation, size and momentum) with five smart beta diversification strategies. These comprise an equal, as well as an efficient volatility weighting, plus a diversified multi-strategy approach that allocates stock weighting based on the average of these five separate methodologies. (…)"
    Copyright IPE [Full text - Registration required]
    The French quant connection
    "(…) Noël Amenc, director of ERI Scientific Beta, the commercial spin-off of EDHEC Business School, says the reason for French asset managers’ recent focus on quantitative equity strategies is because it is a natural way for them to compete using mathematical prowess in tough markets. “France does not have a deep pension sector. As a people, we prefer fixed income to equities because we are risk-averse. Then there is not a deep pot of equities to manage and there is no culture of equity stockpicking in France.” Stockpicking, with all the attendant research, is expensive and Amenc observes that the Americans have a long history of doing it well. “But smart beta is cheap.” So here he sees an entry-point for the French. (…)"
    Copyright IPE [Full text - Registration required]


March 2016

  • Business Intelligence Middle East (31/03/2016)
    ‘Smart Beta is not Monkey Business’
    "(…) In new research published in the latest issue of the Journal of Index Investing, entitled “Smart Beta is not Monkey Business,” ERI Scientific Beta has rejected the claims of “monkey portfolio” proponents, who argue not only that all smart beta strategies generate positive value and small-cap exposure, which fully explains their outperformance, but also that similar results are obtained by any random portfolio strategy, including the inverse of such strategies. The “monkey” label comes from the idea that a monkey would be able to generate similar performance through a random selection of stocks. The ERI Scientific Beta paper analyses these claims using test portfolios which follow commonly-employed methodologies for explicit factor-tilted indices. The results directly invalidate all of the above claims. In particular, the results show that many smart beta strategies display exposure to factors other than value or small cap, as well as pronounced differences in factor exposures across different strategies. (…)"
    Copyright Business Intelligence Middle East [Full text]


  • Asia Asset Management (31/03/2016)
    Study says smart beta is not monkey business
    "(…) ERI Scientific Beta (ERISB) cautions against the over-generalising of smart beta strategies, following a study it conducted which invalidates the claims of smart beta critics, who often tout such strategies as “monkey business”. According to ERISB, proponents of the “monkey business” theory often argue that the outperformance of smart beta strategies in generating positive value and small-cap exposure can also be obtained via any random portfolio strategy and their inverses. While conceding that the arguments may hold true for certain specifications, ERISB emphasises that they do not hold in general. In its study entitled Smart Beta is not Monkey Business, issued in March, ERISB finds that only the indices termed “fundamental” behave like monkey portfolios. The reasons, it adds, are due to firstly, their method of construction, which is based on accounting criteria that are not associated with any statistically significant risk premiums over the long term, and secondly, their high level of concentration, which results in a large proportion of specific risk that leads to random outcomes. (…)"
    Copyright Asia Asset Management [Full text - Registration required]


  • Benefits and Pensions Monitor (30/03/2016)
    ‘Monkey Portfolio’ Claims Rejected
    "(...) ERI Scientific Beta has rejected the claims of ‘monkey portfolio’ proponents who argue not only that all smart beta strategies generate positive value and small cap exposure, which fully explains their outperformance, but also that similar results are obtained by any random portfolio strategy, including the inverse of such strategies. In its research, ‘Smart Beta is not Monkey Business,’ it looks at these claims using test portfolios which follow commonly-employed methodologies for explicit factor-tilted indices. The results directly invalidate all of the above claims. In particular, the results show that many smart beta strategies display exposure to factors other than value or small cap, as well as pronounced differences in factor exposures across different strategies. The ‘monkey’ label comes from the idea that a monkey would be able to generate similar performance through a random selection of stocks. (...)"
    Copyright Benefits and Pensions Monitor [Full text]


  • Asset Servicing Times (30/03/2016)
    Investors still hungry for ETFs
    "(...) Appetite is increasing for exchange-traded funds (ETFs), according to the EDHEC-Risk annual European ETF survey. The survey found that ETFs are making up an increasing proportion of portfolio holdings across traditional asset classes. In 2015, 91 percent of respondents said they use ETFs to invest in equities, compared to 45 percent in 2006. In 2015, 82 percent said they use ETFs for investing in commodities, compared to 15 percent in 2006, while ETFs for government and corporate bonds and real estate also saw significant increases. Six out of seven asset classes saw an increase in their ETF market share, compared to 2014. Equities, government bonds and infrastructure each saw a 1 percent increase and commodities saw a 3 percent increase, but corporate bonds and real estate saw a 10 and 11 percent increase, respectively. Hedge funds noted a 3 percent decrease in their ETF market share. Satisfaction rates remained at a high level, increasing from 91 percent in 2014 to 98 percent in 2015. According to the survey report, rates of ETF satisfaction have been around 90 percent since the survey began in 2006. (...)"
    Copyright Asset Servicing Times [Full text]


  • Investment Europe (30/03/2016)
    Research crushes simplistic explanations of smart beta performance
    "(...) ERI Scientific Beta, part of the EDHEC-Risk Institute, has published a new research rejecting simplistic explanations of smart beta performance. The study, entitled “Smart Beta is not Monkey Business,” rejects arguments claiming that all smart beta strategies generate positive value and small-cap exposure, which fully explains their outperformance, and also that similar results are obtained by any random portfolio strategy, including the inverse of such strategies. “The “monkey” label comes from the idea that a monkey would be able to generate similar performance through a random selection of stocks,” said the ERI Scientific Beta. Its paper analyses these claims using test portfolios which follow commonly-employed methodologies for explicit factor-tilted indices. Results invalidate all of the claims. (...)"
    Copyright Open Door Media Publishing Limited [Full text]


  • Funds Europe (30/03/2016)
    Smart beta is not always “monkey business”, say academics
    "(…) Smart beta returns could not be created by monkeys randomly selecting stocks, says ERI Scientific Beta, which is part of France’s EDHEC-Risk Institute. In a paper called ‘Smart Beta is not Monkey Business’, ERI says smart beta outperformance could not be obtained by random portfolio selection and that the inverse of these strategies produces inferior performance. However, the paper does acknowledge that the ‘monkey’ selection theory may hold for some particular smart beta experiments that some researchers have conducted, but that the theory does not hold in general. The paper shows the monkey theory is most true of fundamental indices, as the method of construction is based on accounting criteria that are not associated with any statistically significant risk premium over the long term. The main point is to avoid over generalising about particular specifications of smart beta testing, ERI says. (...)"
    Copyright Funds Europe [Full text - Registration required]


  • L'Agefi Suisse (30/03/2016)  
    EDHEC-Risk Institute: aucun singe dans le smart beta
    "(...) L’ERI-Scientific Beta vient de publier une note de recherche dans la dernière édition du Journal of Index Investing, intitulée «Beta is not monkey business», dans laquelle l’institution académique réfute l’idée selon laquelle les stratégies smart beta génèreraient les mêmes performances que... (...)"
    Copyright L'Agefi Suisse [Full text - French - Registration required]


  • ETF Strategy (29/03/2016)
    EDHEC’s Scientific Beta refutes smart beta “monkey” claims
    "(...) Smart beta strategies are effective at isolating and capturing risk premia, according to Scientific Beta, a commercial venture of EDHEC Risk Institute. The firm’s latest research paper, “Smart Beta is not Monkey Business”, confirms that investors are able to use smart beta investment products, such as certain exchange-traded funds, to achieve specific factor exposures. The paper investigated claims that all smart beta strategies gain exposure to the size factor and that any out-performance is solely attributable to this exposure, and that similar results may be obtained by a random, so-called “monkey” weighting strategy. The monkey label comes from the idea that a monkey would be able to generate similar performance through a random selection of stocks. (...)"
    Copyright ETF Strategy Ltd [Full text]


  • aiCIO (29/03/2016)
    Smart Beta vs. the Monkeys
    "(...) However, this is not the case, according to new research from the EDHEC Risk Institute, which appears in the latest Journal of Index Investing issue. “Our results are not supportive of the monkey portfolio argument,” authors Noël Amenc, Felix Goltz, and Ashish Lodh wrote succinctly in their paper, “Smart Beta Is Not Monkey Business.” “For a better understanding of smart beta strategies, it is crucial to analyze their construction principles, performance characteristics, and risk factor exposures,” they wrote, “including not only value and small-cap factors but also a variety of other well-documented risk factors, such as momentum, profitability, investment, low risk, and possibly others.” The trio analyzed equal-weighted portfolios as well as factor indexes, testing for correlations between them and their benchmarks. They also inverted each portfolio to test the strength of the factor tilt in each case. (...) “Although the monkey portfolio arguments may apply to particular strategies, they have been invalidated for the explicit factor strategies we chose as our main test portfolios here, and therefore these claims cannot be applied to smart beta strategies in general,” they concluded. Take that, monkeys. (...)"
    Copyright Asset International [Full text]


  • Wealth Adviser (29/03/2016)
    Paper warns of over generalising on smart beta
    "(...) EDHEC Risk’s smart beta platform provider, ERI Scientific Beta, has published a research paper warning against simplistic explanations of smart beta performance. ‘Smart Beta is not Monkey Business’ is published in the latest issue of the Journal of Index Investing and rejects the claims of ‘monkey portfolio’ proponents, who argue not only that all smart beta strategies generate positive value and small-cap exposure, which fully explains their outperformance, but also that similar results are obtained by any random portfolio strategy, including the inverse of such strategies. The ‘monkey’ label comes from the idea that a monkey would be able to generate similar performance through a random selection of stocks. The ERI Scientific Beta paper analyses these claims using test portfolios which follow commonly-employed methodologies for explicit factor-tilted indices. The results directly invalidate all of the above claims. In particular, the results show that many smart beta strategies display exposure to factors other than value or small cap, as well as pronounced differences in factor exposures across different strategies. (...)"
    Copyright GFM Limited [Full text]


  • Risk.net (23/03/2016)
    Liquidity adds to institutional zest for hedge fund clones
    "(...) In a 2015 European survey by EDHEC, 74% of investors said increasing ETF use would serve as a substitute for the use of active managers, up from 64% the previous year. And 45% said liquidity was a motivation for buying ETFs, up from the previous 38%. Some in the industry, though, are sceptical about whether hedge fund clones deliver good value. Lionel Martinelli, professor of finance at EDHEC Business School in Nice, found that hedge fund clone strategies between 1999 and 2015 had consistently lower Sharpe ratios than a risk-parity portfolio for each strategy (see table). At the same time, only 36% of respondents to EDHEC's survey said they were satisfied with hedge fund ETFs, compared with satisfaction rates of 98% for equity ETFs and 89% for sovereign bond ETFs. (...)"
    Copyright Incisive Media Investments Limited [Full text - Registration required]


  • ETF World (23/03/2016)
    New Amundi ETF with access to Scientific Beta index family’s multi-strategy approach launched on Xetra
    "(...) A new equity index ETF issued by Amundi has been tradable on Xetra and Börse Frankfurt since Tuesday. (...) The Amundi ETF Europe Equity Multi Smart Allocation Scientific Beta UCITS ETF enables investors to participate for the first time in the multi-strategy approach of the Scientific Beta index family with a focus on European companies. The reference index tracks the performance of the companies in the four sub-indices of the Scientific index family with the aim of generating a higher return than the indices weighted traditionally by market capitalisation. Only large and mid-cap companies from industrialised nations and based in Europe are considered for selection, based on the following four risk factors: companies with the lowest market capitalisation, companies with the highest price to book ratio, companies with the highest dividend reinvestment return, and companies with the lowest volatility. (...)"
    Copyright ETFWorld.co.uk [Full text]


  • Private Wealth Canada (21/03/2016)
    ETFs Satisfy Investors
    "(...) ETFs make up an increasing proportion of portfolio holdings across asset classes and satisfaction has remained at high levels especially for traditional asset classes, says the EDHEC ‘European ETF Survey 2015.’ It shows a significant increase in satisfaction with equity ETFs, which now enjoy a satisfaction rate of 98 per cent, compared to 91 per cent in 2014. The satisfaction rates for ETFs based on the most liquid asset classes are far more consistent compared to those based on illiquid asset classes It also shows investors have increased their use of ETFs to invest in smart beta, with the proportion reaching 68 per cent of respondents in 2015 compared to 49 per cent in 2014. (...)"
    Copyright Private Wealth Canada [Full text]


  • ETF.com (21/03/2016)
    New Japan ETF A Standout Among Giants
    "(...) The Global X Scientific Beta Japan (SCIJ) is a smart-beta take on Japan’s total equity market, and one that’s not even a year old yet. Still, this young—small—fund, with less than $12 million in assets, is delivering an impressive performance relative to the giants in the space. SCIJ is a multifactor fund that invests in Japan’s 500 largest stocks. The fund picks its securities based on value, size, low volatility and momentum. These factors are measured by price-to-book ratio, free-float market capitalization, historical volatility over a two-year period, and one-year-minus-one-month total returns, respectively. The holdings are then weighted in the portfolio based—again—on a multifactor approach that strives to diversify risk. (...) SCIJ and other multifactor funds look to hone in on factors that have a track record of outperforming market-cap-weighted strategies. And since inception, SCIJ has delivered just that. From its launch on May 12, 2015 to date, SCIJ has slipped 1.2%, while EWJ is down 10% in the same period. DXJ is down nearly twice that, with a 19% loss—a far steeper decline associated to the strengthening of the yen against the dollar in the period. (...)"
    Copyright ETF.com [Full text]


  • Structured Retail Products (18/03/2016)
    Variable annuities suffer from a number of fatal flaws, EDHEC
    "(...) Variable annuities are structured products with all the pros and cons associated, said Lionel Martellini (pictured), PhD, professor of finance, EDHEC Business School, during the New Frontiers in Retirement Solutions speech at the EDHEC Risk Days 2016, in London on March 16. (...)"
    Copyright Structured Retail Products, a division of Euromoney Global Limited [Full text - Registration required]


  • ETF Strategy (17/03/2016)
    Smart beta ETF use on the rise, finds EDHEC
    "(...) The portion of investors putting their money into smart beta exchange traded funds has risen from 49% to 68% since 2014, according to the findings of EDHEC’s European ETF Survey 2015. The report, which investigates the current use of ETFs by 180 institutional European investors, showed that ETFs based on smart beta indices are of top concern to respondents when it comes to future growth, with 38% hoping for further development in this area. The EDHEC Survey, which is conducted as part of the Amundi ETF, Indexing & Smart Beta research chair at EDHEC-Risk Institute on “ETF and Passive Investment Strategies”, highlights investors’ high satisfaction rate and their expectations around Smart Beta solutions. (...)"
    Copyright ETF Strategy Ltd [Full text]


  • Asset Servicing Times (17/03/2016)
    Investors still hungry for ETFs
    "(...) Appetite is increasing for exchange-traded funds (ETFs), according to the EDHEC-Risk annual European ETF survey. The survey found that ETFs are making up an increasing proportion of portfolio holdings across traditional asset classes. In 2015, 91 percent of respondents said they use ETFs to invest in equities, compared to 45 percent in 2006. In 2015, 82 percent said they use ETFs for investing in commodities, compared to 15 percent in 2006, while ETFs for government and corporate bonds and real estate also saw significant increases. Six out of seven asset lasses saw an increase in their ETF market share, compared to 2014. Equities, government bonds and infrastructure each saw a 1 percent increase and commodities saw a 3 percent increase, but corporate bonds and real estate saw a 10 and 11 percent increase, respectively. Hedge funds noted a 3 percent decrease in their ETF market share. (...)"
    Copyright Asset Servicing Times [Full text]


  • Benefits and Pensions Monitor (17/03/2016)
    ETFs Satisfy Investors
    "(...) ETFs make up an increasing proportion of portfolio holdings across asset classes and satisfaction has remained at high levels especially for traditional asset classes, says the EDHEC ‘European ETF Survey 2015.’ It shows a significant increase in satisfaction with equity ETFs, which now enjoy a satisfaction rate of 98 per cent, compared to 91 per cent in 2014. The satisfaction rates for ETFs based on the most liquid asset classes are far more consistent compared to those based on illiquid asset classes. It also shows investors have increased their use of ETFs to invest in smart beta, with the proportion reaching 68 per cent of respondents in 2015 compared to 49 per cent in 2014. ETFs based on smart beta indices represent the top concern of respondents when it comes to future developments, with 38 per cent of them hoping for further developments in this area. As well, cost considerations appear to be the main driver behind increasing ETF allocations. (...)"
    Copyright Benefits and Pensions Monitor [Full text]


  • Exchange-Traded Funds (16/03/2016)
    EDHEC-Risk's annual European ETF Survey sheds new light on drivers of investor demand for ETFs and evaluation challenges for investors
    "(...) EDHEC-Risk Institute has announced the results of the EDHEC European ETF Survey 2015, a comprehensive survey of 180 European ETF investors, conducted as part of the Amundi ETF, Indexing & Smart Beta research chair at EDHEC-Risk Institute on "ETF and Passive Investment Strategies". EDHEC-Risk Institute has conducted a regular ETF survey since 2006, thus providing a detailed account of the perceptions and practices of European investors in ETFs and trends over the past decade. Key findings of the 2015 survey included the following: INCREASING APPETITE FOR ETF USAGE ETFs make up an increasing proportion of portfolio holdings across asset classes. (...)"
    Copyright exchangetradedfunds.com [Full text]


  • aiCIO (16/03/2016)
    Investors Sweet on ETFs, Smart Beta Indexes
    "(...) Institutional appetite for exchange-traded funds (ETFs) and smart beta indexes is soaring, according to EDHEC-Risk Institute and Amundi’s latest survey. (...) Investors were likewise bright about the use of smart beta ETF products. In 2015, 68% of respondents used ETFs to invest in smart beta, a significant increase from 49% in 2014. Smart beta ETFs also received an 86% satisfaction rate in 2015, compared to 74% in 2014. Furthermore, three-quarters of respondents believed smart beta indexes provided “significant potential to outperform cap-weighted indexes in the long term,” the survey found. However, investors argued there is room for further product development, especially since product launches have focused on only a few popular strategies such as value premium and defensive equity. Some 94% also agreed that smart beta indices require full transparency on methodology and risk analytics. “Transparency is not only the best protection against the risks arising from conflicts of interests, but it is also instrumental in improving the informational efficiency of the indexing industry,” EDHEC and Amundi concluded. The two firms have partnered on creating and selling factor-tilted ETFs. (...)"
    Copyright Asset International [Full text]


  • Funds Europe (16/03/2016)
    Investors back smart beta ETFs
    "(…) Many investors are positive towards smart beta but want to see more product development, a survey has found. Two-thirds of 180 European exchange-traded fund (ETF) investors that were surveyed said smart beta indices provided significant potential to outperform cap-weighted indices in the long term. Just over 80% said smart beta ETFs were a good alternative to cap-weighted indices, which they said were concentrated in very few stocks or sectors. The survey, by academic body EDHEC-Risk Institute, found a growing appetite for smart beta ETFs, with the 49% of respondents that invested in smart beta in 2014 rising to 68% last year. However, ETFs based on smart beta indices represent the top concern for respondents. Nearly 40% wanted more developments in this area. (...)"
    Copyright Funds Europe [Full text - Registration required]


  • Financial Investigator (16/03/2016)
    EDHEC-Risk Institute: Results of the European ETF Survey 2015 revealed
    "(...) EDHEC-Risk Institute has announced the results of the EDHEC European ETF Survey 2015, a comprehensive survey of 180 European ETF investors, conducted as part of the Amundi ETF, Indexing & Smart Beta research chair at EDHEC-Risk Institute on “ETF and Passive Investment Strategies”. EDHEC-Risk Institute has conducted a regular ETF survey since 2006, thus providing a detailed account of the perceptions and practices of European investors in ETFs and trends over the past decade. (...) Professor Lionel Martellini, Director of EDHEC-Risk Institute, added, “This survey confirms the relevance of ETFs in institutional investors’ asset allocation. Smart beta indices appear to be a key growth area for the ETF industry looking forward, with an ever increasing focus on improved transparency and informational efficiency.” (...)"
    Copyright Financial Investigator Publishers [Full text]


  • Wealth Adviser (16/03/2016)
    EDHEC ETF survey finds investors want more transparency
    "(...) Findings from the EDHEC European ETF Survey 2015 reveal investors want more ETFs, particularly smart beta ETFs, but want more transparency on methodology and risk analytics. The survey found that ETFs make up an increasing proportion of portfolio holdings across the asset classes and that satisfaction has remained at high levels especially for traditional asset classes with a significant increase in satisfaction with equity ETFs, which now enjoy a satisfaction rate of 98 per cent, compared to 91 per cent in 2014. The satisfaction rates for ETFs based on the most liquid asset classes are far more consistent compared to those based on illiquid asset classes, the survey found. The survey says that investors recognise the high quality of ETFs when compared to competing indexing vehicles and that investors have increased their use of ETFs to invest in smart beta, with the proportion reaching 68 per cent of respondents in 2015 compared to 49 per cent in 2014. (...)"
    Copyright GFM Limited [Full text]


  • Investment Week (16/03/2016)
    Revealed: Winners of the TrackInsight ETF awards
    "(...) Last night saw the first TrackInsight ETF Awards, which recognised four best-in-class blockbuster ETFs in Europe. The awards, presented at the EDHEC Risk Days 2016 conference, were handed out to the top providers in four categories: European large-cap equities; North America large-cap equities; emerging markets equities; and investment grade corporate bonds. (...)"
    Copyright Incisive Business Media (IP) Limited [Full text]


  • Financial News (14/03/2016)
    Turquoise to launch ‘A-list’ ETF platform
    "(...) The move comes amid wider concerns over transparency in the ETF market. The growth of "smart beta" ETFs, ones based on alternatives to traditional indices, could be hampered by index providers' unwillingness to share information with investors, according to the French business school EDHEC. EDHEC canvassed opinions from 180 ETF buyers managing a collective €3.1 trillion, finding that interest in smart beta ETFs is keen, with 37% of the investors already using them and 33% considering them. But investors are also struggling to get the information and disclosure they need to understand the products, the EDHEC survey found. Felix Goltz, head of applied research at the EDHEC-Risk Institute, said index providers – who typically license the smart beta indexes to fund managers so they can create investable ETFs – seemed particularly reluctant to share information relating to how the indexes are created. He said: "New indexes are typically back-tested to make sure they perform, before the ETF is created. A very simple thing would be to get access to the portfolio holdings during the back-test period. If you are going to analyse the strategy, you have to understand the back-test. Goltz said: "There is a risk that investors might shy away. There is also the risk that they will invest without understanding properly what they are investing in." (...)"
    Copyright Financial News [Full text - Registration required]


  • Asia Asset Management (March 2016)
    Herd mentality: Are crowded trades an issue in smart beta strategies?
    Article by Felix Goltz and Sivagaminathan Sivasubramanian
    "(…) Smart beta strategies in the equity arena have been finding space between traditional (cap-weighted) passive investments and traditional (proprietary and discretionary) active management. Perhaps unsurprisingly, smart beta draws criticism from providers of both traditional active management and traditional passive management. Proponents of proprietary active strategies complain that smart beta is not active enough while proponents of traditional cap-weighting say that smart beta is not passive enough. Among such critiques, a recurring issue is the presumption of a risk of “crowding” in smart beta strategies. Unfortunately, while crowding is commonly pointed to as a potential risk, it is rarely formalised or even defined. The main idea behind a crowding risk is that, as everyone learns about successful smart beta strategies and increasingly invests in them, flows into these strategies will ultimately cancel out their benefits. (…)"
    Copyright Asia Asset Management [Full text - Registration required]


  • Barron's (04/03/2016)
    Goldman Cuts Fee on One ‘Smart Beta’ ETF, Launches Two More
    "(…) Goldman Sachs Asset Management fired another salvo in the fee war that’s fast engulfing the market for “smart beta” exchange-traded funds. (...) Others are doing the same: Global X this week announced it dropped the fee on its million Scientific Beta US ETF (SCIU) to 0.19% a year, down from 0.35%, until March 1, 2017. (...)"
    Copyright Barron's [Full text]


  • Retirement Income Journal (03/03/2016)
    Scaling Retirement Solutions
    "(…) Given the recent advent of robo-advice and “fintech,” the chief of a European financial think tank believes that it’s time to mass-customize retirement income solutions. His name is Lionel Martellini, and he’s presenting on that topic at a conference on Retirement Investing to be held at Oxford University next September. The 48-year-old Martellini directs the EDHEC Risk Institute, a research arm of the prestigious international business school, EDHEC. Recently, he published an editorial and a March 2015 research report that should interest anybody who cares about retirement income planning or is affected by the robo-advice wave or both. The two documents, respectively, have long titles: “Mass Customization versus Mass Production: How an Industrial Revolution is About to Take Place in Money Management and Why It Involves a Shift from Investment Products to Investment Solutions,” and “Introducing a Comprehensive Investment Framework for Goals-Based Wealth Management.” In a recent conversation, Martellini (right) told RIJ, “We need to move to solutions, not products, and the client’s problem should always serve as the starting point for the discussion. We can already create custom solutions for pension funds or high net worth individuals, so the real challenge is to do customization on a large scale.” (...)"
    Copyright RIJ Publishing LLC [Full text]


  • Barron's (01/03/2016)
    Fee War Rages In ‘Smart-Beta’ ETFs
    "(…) The years-long fee war gripping the market for plain-vanilla exchange-traded funds has quickly spawned another front — “smart beta.” (...) Global X is the latest to lower the fee bar this way. The company announced in a recent filing that it dropped the fee on its $12 million Scientific Beta US ETF (SCIU) to 0.19% a year, down from 0.35%. That brings it well below average for large-cap “strategic beta” ETFs, which Morningstar late last year calculated at 0.39%. (...)"
    Copyright Barron's [Full text]


  • Financial Advisor (01/03/2016)
    Global X Adds To Smart Beta ETFs
    "(...) New York-based Global X Funds is adding a new emerging market fund to its suite of smart beta ETFs. The Global X Scientific Beta Emerging Markets ETF will track the Scientific Beta Emerging Multi-Beta Multi-Strategy Equal Risk Contribution Index. In an approach designed by the Singapore-headquartered EDHEC Risk Institute, the index targets factors of size, value and momentum, then applies multiple weighting approaches to maximize the diversification level of the index. The new product joins four other Global X scientific beta ETFs launched in 2015 that track the indexes of equities in the U.S., Europe, Japan and Asia (outside Japan). (...)"
    Copyright Charter Financial Publishing Network Inc. [Full text]


February 2016

  • ETF Trends (29/02/2016)
    The Smart-Beta ETF Evolution
    "(...) Bruno del Ama, CEO of Global X, joined Tom Lydon, ETF Trends Publisher, at the Inside ETFs conference to go over some innovative strategies in the exchange traded fund industry. Del Alma pointed to the popular smart-beta ETF space as an up-and-coming segment of the industry, singling out multi-factor investment strategies. For instance, Global X recently came out with 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). The so-called scientific beta ETFs are based off EDHEC-Risk Institute indices that utilize multiple factors, including low-volatility, momentum, size and value. (...)"
    Copyright Global Trends Investments [Full text]


  • ThinkAdvisor (26/02/2016)
    Top Portfolio Products: New Low-Carbon Indexes and Enhanced Beta ETFs
    "(...) Here are the latest developments of interest to advisors:
    1) ERI Scientific Beta Launches Line of Low-Carbon Indexes
    ERI Scientific Beta launched a series of low-carbon smart beta indexes for institutional investors that can reduce the carbon footprint of their equity investments by more than 80% while outperforming traditional market indexes. The indexes exclude the largest carbon emitters, the worst carbon-intense firms in major market sectors and the largest holders of fossil assets. ERI Scientific Beta hopes the exclusion of these firms will move them to change their strategy or production process in order to be removed from the exclusion list.
    (...)"
    Copyright ThinkAdvisor [Full text]


  • Financial Investigator (25/02/2016)
    EDHEC-Risk Institute: Presentation of latest research at the EDHEC-Risk Days conference in London
    "(...) Smart beta solutions, factor investing, multi-asset risk allocation, infrastructure, and hedge fund investing are among the topics to be presented at the EDHEC-Risk Days 2016 conference at The Brewery in London on March 15-16 next. The conference will feature the latest EDHEC-Risk Institute research on a range of topics that are currently relevant for the financial industry. On the first day, the latest research results on smart beta risk allocation solutions, factor-based investment strategies, robustness and live performance of smart beta as well as current misconceptions in smart beta investing will be presented. The conference will also be the occasion to discover the results of the latest European ETF survey. On day two, the Institutional Money Management Conference will present research of great interest to institutional investors on new frontiers in retirement solutions, multi-dimensional risk and performance analysis, hedge fund investing and multi-asset allocation solutions. Day two will also include the EDHECinfra Forum presenting the latest research results on infrastructure investing. (...)"
    Copyright Financial Investigator Publishers [Full text]


  • L'Agefi Suisse (24/02/2016)  
    EDHEC-Risk Institute: Smart beta empreinte carbone
    "(...) ERI Scientific Beta (EDHEC-Risk Institute) a annoncé hier le lancement d’indices actions dits «verts», réduisant de 80% l’empreinte carbone des investissements dans les actions. La plupart des indices à faible empreinte carbone se caractérisent par... (...)"
    Copyright L'Agefi Suisse [Full text - French - Registration required]


  • Exchange-Traded Funds (23/02/2016)
    ERI Scientific Beta announces the launch of new low carbon indices
    "(...) EDHEC Risk Institute has been conducting research for several years on the possibility of reconciling financial and environmental performance. The launch of a new series of low carbon indices by ERI Scientific Beta, the smart beta index provider set up by EDHEC Risk Institute in 2012, marks the practical realisation of these research efforts and represents an important moment for responsible finance, because the results of the research undertaken will provide institutional investors with smart beta indices that can reduce the carbon footprint of their equity investments by more than 80%, while at the same time outperforming traditional market indices and being able to create more than 50% additional value in the medium term. (...)"
    Copyright exchangetradedfunds.com [Full text]


  • Investment Europe (23/02/2016)
    ERI Scientific Beta launches new low carbon indices
    "(...) ERI Scientific Beta, the smart beta index provider of EDHEC-Risk Institute, has launched new low carbon indices. According to EDHEC’s research, these smart beta indices can reduce the carbon footprint of their equity investments by more than 80%, while at the same time outperforming traditional market indices. It said the indices are also able to create more than 50% additional value in the medium term. EDHEC Risk Institute’s approach seeks to outperform the stock markets through the higher returns of shares in firms having a better carbon footprint, because these firms are supposedly less affected by the rising cost of fossil fuels and the tons of carbon emitted, but that, in the short and medium term, aim to produce a similar performance to that of traditional stock market indices. (...)"
    Copyright Open Door Media Publishing Limited [Full text]


  • Financial Investigator (23/02/2016)
    ERI Scientific Beta announces the launch of new low carbon indices
    "(...) EDHEC Risk Institute's approach can be distinguished from numerous approaches that, over the long term, hope to outperform the stock markets through the higher returns of shares in firms that have a better carbon footprint, because these firms are supposedly less affected by the increasing cost of fossil fuels and the tons of carbon emitted, but that, in the short and medium term, aim to produce performance that is fairly similar to that of traditional stock market indices. For the green indices produced by ERI Scientific Beta, the idea is offer access to short and medium-term outperformance by using consensual results from financial research. The “green” premium, which has not yet been scientifically and empirically demonstrated, will be able to play out as a long-term complement to performance, but Scientific Beta's green and smart beta indices already produce performance by relying on the consensual state-of-the-art in academia in the area of factor investing and portfolio diversification. (...)"
    Copyright Financial Investigator Publishers [Full text]


  • ETF Strategy (23/02/2016)
    ERI Scientific Beta unveils low carbon smart beta indices
    "(...) ERI Scientific Beta, a smart beta index provider and a commercial venture of Paris-headquartered EDHEC Risk Institute, has announced the launch of the ERI Scientific Beta Low Carbon Multi-Beta Multi-Strategy Indexes, a series of low carbon smart beta indices. Developed in collaboration with the South Pole Group, a sustainability solutions consultant, the indices seek to reduce the carbon footprint of equity investments by as much as 80% while simultaneously being able to create more than 50% additional value in the medium term. Maximilian Horster, Director Financial Industry at South Pole Group, commented: “We are delighted to share our expertise with ERI Scientific Beta to produce low-carbon versions of their highly respected multi-smart factor indices. The combination of low-carbon emissions and state-of-the-art smart factor indices is a compelling opportunity for investors globally.” Given the marriage of two “hot” investment themes, namely ESG / low carbon and smart beta, the indices will likely draw the attention of exchange-trade fund issuers who may look to license the indices for ETF product development. (...)"
    Copyright ETF Strategy Ltd [Full text]


  • Institutional Asset Manager (23/02/2016)
    ERI Scientific Beta launches new low carbon indices
    "(...) ERI Scientific Beta has launched a new series of low carbon smart beta indices designed to allow institutional investors to reduce the carbon footprint of their equity investments by more than 80 per cent, while outperforming traditional market indices. The indices aim to create more than 50 per cent additional value in the medium term. For the green indices produced by ERI Scientific Beta, the idea is to offer access to short and medium-term outperformance by using consensual results from financial research. The “green” premium, which has not yet been scientifically and empirically demonstrated, will be able to play out as a long-term complement to performance, but Scientific Beta's green and smart beta indices already produce performance by relying on the consensual state-of-the-art in academia in the area of factor investing and portfolio diversification. (...)"
    Copyright GFM Limited [Full text]


  • FTfm (22/02/2016)
    Smart beta ‘could go horribly wrong’
    "(...) Smart beta, one of the most popular investment strategies of the past 12 months, could go “horribly wrong” and leave investors nursing large-scale losses, according to one of the pioneers of the concept. (...) But Mr Arnott’s comments were met with resistance from other smart beta providers. Felix Goltz, research director at the EDHEC Risk Institute, a research institution that has developed smart beta indices, said it was “well documented, both empirically and theoretically” that smart-beta strategies deliver outperformance in the long term. Research Affiliates’ fundamental equity indexation strategy, which weights stocks based on their underlying value, has underperformed over recent years relative to a cap-weighted benchmark, said Mr Goltz. In contrast, many of the strategies that Research Affiliates called overpriced have outperformed, he added. (...)"
    Copyright Financial Times Fund Management [Full text]


  • Funds Europe (February 2016)
    EDHEC RESEARCH: Factor fishing
    Article by Felix Goltz, head of applied research at EDHEC-Risk Institute
    "(…) Felix Goltz of the EDHEC-Risk Institute charts how the main investment factors, such as value and momentum, have risen to prominence – aided by their relevance not just to US equities, but other markets too. Asset-pricing theory postulates that multiple sources of systematic risk are priced in securities markets. The economic intuition for the existence of a reward for a given risk factor is that exposure to such a factor is undesirable for the average investor because it leads to losses in bad times. For example, while investors may gain a payoff from exposure to illiquid securities as opposed to liquid ones, such illiquidity may lead to losses in times when liquidity dries up and a flight to quality occurs, such as during the 2008 financial crisis. In such conditions, hard-to-sell (illiquid securities) may post heavy losses. While asset-pricing theory provides a sound rationale for the existence of multiple factors, theory provides little guidance on which factors should be rewarded. (...)"
    Copyright Funds Europe [Full text - Registration required]


  • Financial News (19/02/2016)
    Multi-factor ETFs: A new honey pot for fund providers
    "(...) Eric Shirbini, global product specialist at ERI Scientific Beta, said the primary benefit of multi-factor ETFs is to reduce and control risk because they tend to have lower tracking errors and, because they are more diversified, they are more likely to produce better results. He added: “With lower relative drawdowns, multi-factor ETFs recover much quicker than single-factor ETFs and have better performance across different market conditions.” (...) A downside for long-term investors is that a multi-factor index provides similar returns as the single factor index over the long run, according to Shirbini. “For example, by investing 25% each in four factors, an investor will capture 25% of each factor risk premium. If the risk premiums are approximately the same then there isn't much benefit in terms of return,” he said. (...)"
    Copyright Financial News [Full text - Registration required]


  • Les Echos (16/02/2016)  
    Ce prof de finance a aidé à valider la théorie d'Einstein
    "(...) Lionel Martellini, 48 ans, professeur de finance à l'EDHEC, a participé aux travaux de recherche des astrophysiciens qui ont découvert les ondes gravitationnelles. (...) Au moment où le monde scientifique est bouleversé par la découverte des ondes gravitationnelles, théorisées il y a un siècle par Albert Einstein, Lionel Martellini, professeur de finance à l’EDHEC à Nice depuis 2006, co-signe en effet un article sur le sujet dans la prestigieuse revue Physical Review Letters. Il s’est ainsi associé au collège international de 19 laboratoires de recherche à l’origine de cette découverte qui ouvre de nouvelles perspectives quant à l’observation de l’espace. (...) Tout en continuant à donner des cours à l’Edhec, Lionel Martellini prépare une thèse de doctorat en astrophysique relativiste qu’il présentera en juillet à l’université de Nice. Parallèlement, en finance, il poursuit ses travaux de recherche sur l'évaluation de produits dérivés et la gestion quantitative d'actifs, notamment, ce qui l’a conduit en 2014 à la direction de l’EDHEC Risk-Institute. (...)"
    Copyright Les Echos [Full text - French - Registration required]


  • ETF Trends (10/02/2016)
    Greater Education Needed to Keep Up with ETF Innovation
    "(...) Additionally, ETF Securities has partnered with ERI Scientific Beta on the relatively new ETFS Diversified-Factor U.S. Large Cap Index Fund (NYSEArca: SBUS) and ETFS Diversified-Factor Developed Europe Index Fund (NYSEArca: SBEU). 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. The ETFS Diversified-Factor U.S. Large Cap Index Fund and ETFS Diversified-Factor Developed Europe Index also 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]


  • Financial News (08/02/2016)
    Smart beta gets cheaper: Fees down 90% in five years
    "(...) European pension schemes have been particularly enthusiastic purchasers of smart beta products. According to a circular distributed by Bernstein: “Smart beta is the Uber of fund management. Asset share will grow not because the products are so great but because there is a disruptive lowering of costs and increasing factor exposure.” According to its web site, French research firm ERI Scientific Beta offers access to 2,600 indices. The Bernstein circular said: “There are now more smart beta indices than large cap stocks." (...)"
    Copyright Financial News [Full text - Registration required]


January 2016

  • Investment Europe (29/01/2016)
    Amundi launches European equities multi smart beta ETF
    "(...) Amundi ETF has launched a multi smart beta ETF offering exposure to European equities. The ETF tracks the Scientific Beta Extended Developed Europe Multi-Beta Multi-Strategy ERC strategy index as closely as possible, whether the trend is increasing or decreasing, and will soon be listed on Euronext. It is to be cross-listed on the main European stock exchanges in the coming months. The Scientific Beta Extended Developed Europe Multi-Beta Multi-Strategy ERC strategy index, made by EDHEC-Risk Institute Scientific Beta, represents mid and large cap stocks on developed European equity markets. It consists of four universes based on the following risk factors: value, size, momentum and volatility, which use five weighting schemes. An “equal risk contribution” weighting of the four factor portfolios is applied. (...)"
    Copyright Open Door Media Publishing Limited [Full text]


  • Fund Strategy (29/01/2016)
    Amundi launches European smart beta ETF
    "(...) Amundi has launched a multi smart beta ETF which will track European equities. The smart beta fund will track the Scientific Beta Extended Developed Europe Multi-Beta Multi-Strategy ERC strategy index. The index mainly targets mid and large cap stocks on developed European equity markets. The index has four risk tilts: value, size, momentum and volatility, which the index then equal weights. The fund, which will have ongoing charges of 0.4 per cent, will soon be listed on both the Euronext and the main European stock exchanges. (...)"
    Copyright Centaur Communications Ltd [Full text]


  • L'Agefi Suisse (29/01/2016)  
    ERI Scientific Beta: surperformance 2015
    "(...) Tous les indices smart beta de l’ERI Scientific Beta Team (EDHEC-Risk Institute), à l’exception d’un seul, ont surperformé les indices capi-pondérés en 2015. Le rapport mensuel des performances de l’institut français montrent que la référence... (...)"
    Copyright L'Agefi Suisse [Full text - French - Registration required]


  • International Adviser (28/01/2016)
    Amundi launches pan European multi smart beta ETF
    "(...) Amundi ETF has extended its smart beta range with the launch of a multi smart beta ETF which offers investors exposure to European equities. The ETF tracks the scientific beta extended developed Europe multi-beta multi-strategy ERC strategy index (ERC) as closely as possible and will soon be listed on Euronext. It will also be cross-listed on the main European stock exchanges in the coming months. (...) Valerie Baudson, chief executive at Amundi ETF, Indexing and Smart Beta, said: “This innovative multi smart beta ETF strengthens our smart beta equity range following the success of Amundi’s global equity multi smart allocation scientific beta UCITS ETF, launched in 2014. “These two multi smart beta exposures reinforce our broad selection of mono-strategy ETFs, which already include minimum volatility, mid-cap, small-cap, growth, value, high dividend and buybacks.”(...)"
    Copyright Last Word Media Limited [Full text]


  • ETF Express (28/01/2016)
    Amundi launches a smart beta European equities ETF
    "(...) Amundi ETF has launched a Multi Smart Beta ETF offering investors exposure to European Equities. The ETF tracks the Scientific Beta Extended Developed Europe Multi-Beta Multi-Strategy ERC strategy index as closely as possible, whether the trend is increasing or decreasing, and will soon be listed on Euronext. It will also be cross-listed on the main European stock exchanges in the coming months. The Scientific Beta Extended Developed Europe Multi-Beta Multi-Strategy ERC strategy index, designed by EDHEC-Risk Institute Scientific Beta, represents mid and large capitalisation stocks on developed European equity markets. It is composed of four universes based on the following risk factors: Value, Size, Momentum and Volatility, which use five weighting schemes. An ‘equal risk contribution’ weighting of the four factor portfolios is then applied. (...)"
    Copyright GFM Limited [Full text]


  • Citywire Wealth Manager (28/01/2016)
    Amundi sets sights on European equities for future ETF launches
    "(...) Amundi ETF is seeking to eke returns out of the stark global equities picture with a series of European-focused smart beta funds. The first to be announced is the Amundi ETF Europe Equity Multi Smart Allocation Scientific Beta Ucits ETF, which will track the Scientific Beta Extended Developed Europe Multi-Beta Multi-Strategy ERC Strategy index. Conceived by EDHEC-Risk Institute Scientific Beta, the index offers exposure to large and mid cap European equity opportunities across the developed market spectrum. The four-way risk-weighted approach compares the value, size, momentum and volatility of potential stocks before applying an ‘equal risk contribution’ process to select index constituents. (...)"
    Copyright citywire.co.uk [Full text]


  • Funds Europe (28/01/2016)
    The best smart beta of 2015 was…
    "(…) The best performing type of smart beta in 2015 was related to the ‘momentum’ factor, according to research. ERI Scientific Beta, which analysed smart beta returns of its own indices, said that its SciBeta Developed High Momentum Diversified Multi-Strategy index produced a return of 4.97% relative to the broader, capital-weighted market, in dollar terms. Meanwhile, a value factor produced the lowest return. The Developed Value Diversified Multi-Strategy index underperformed the broader market by 1.10%. Other factors’ relative returns were positive in 2015. Equal-weighted produced 2.68%; equal relative risk produced 2.25%; and quality produced 3.08%. The returns are taken from ERI’s Multi-Beta Multi-Strategy indices. (...)"
    Copyright Funds Europe [Full text - Registration required]


  • Top 1000 Funds (27/01/2016)
    Assessing Smart Beta Strategies
    Article by Felix Goltz, ERI Scientific Beta
    "(...) Analysing smart beta performance and risks is not monkey business. For a better understanding of smart beta strategies it is crucial to analyse their construction principles, performance characteristics and risk-factor exposures, including not only value and small-cap factors, but also a variety of other well-documented risk factors such as momentum, profitability, investment, low risk, and possibly others, writes Felix Goltz, head of applied research at the EDHEC-Risk Institute. (...)"
    Copyright Conexus Financial Pty Ltd. [Full text]


  • Enterprising Investor (12/01/2016)
    Are Investors Expecting Too Much from Infrastructure?
    "(…) “There’s a lot of talk about a potential bubble, about high prices for infrastructure assets, and that’s kind of counterintuitive because if it is the case that infrastructure pays regular dividends, come rain or shine, then for an investor with a liability profile, this is a very valuable asset indeed,” argues Frédéric Blanc-Brude, research director at EDHEC-Risk Institute in Singapore. He believes that, in most market conditions, investors can continue to benefit from the duration opportunities. “More and more investors are discovering these types of assets, and with increasing demand, their prices should go up. These types of owners value the longer duration compared to corporate debt (if you are in the business of matching and hedging your duration).” (…)"
    Copyright CFA Institute [Full text]


  • IPE (January 2016)
    Pension Funds: What role for active management?
    "(…) The surging stock markets of recent years have called into the question the value of active management as never before. What role should active management play in institutional portfolio construction? How should investors assess whether they can benefit from active management? Carlo Svaluto Moreolo asked leading managers, consultants and fiduciary managers to provide their insights. (...) Jaap van Dam, Director, strategic policy advice, PGGM: Indeed, active versus passive is not a binary question. From a pension fund perspective, the first remark should be, to quote Lionel Martellini, the director of the EDHEC-Risk Institute: “Alpha is not the answer to the pension fund problem”. If you look at aggregated results of pension funds globally, there is a small contribution from active management to the total return, and only if it is well controlled for cost. In general, bigger pension funds have a better chance of adding some value by being active, probably as a function of managing internally at a low cost. (…)"
    Copyright IPE [Full text - Registration required]