ERI Scientific Beta has launched two new families of smart "quality-type" factor indices – High Profitability and Low Investment, allowing investors to benefit from well-documented additional risk premia.
These new smart factor indices have been available on the www.scientificbeta.com platform since 20 March, 2015.
The role of these separate factors relating to firm characteristics has been documented in recent empirical studies. ERI Scientific Beta’s High Profitability and Low Investment factors rely on straightforward and parsimonious indicators, and provide more robust performance benefits than ad-hoc stock picking indicators of “quality” currently used in the industry.
By proposing not one but two smart factor quality indices, ERI Scientific Beta is allowing investors to gain exposure to two very different, and therefore highly decorrelated, factors that represent two dimensions of the quality approach.
This dissociation is in contrast with grey indices constructed through multi-criteria approaches that are not consistent with academic research in the area of quality.
The performance of factor-tilted indices is improved by the use of the diversified multi-strategy scheme offered by Scientific Beta.
Over the very long term (1974-2014), these smart factors have outperformed their corresponding cap-weighted indices by an average annual rate of 3.61% for the US market.
