EDHEC-Risk Institute has launched its smart beta index design and production activity, ERI Scientific Beta. The aim is to revolutionise the index world through, firstly, a new approach to smart beta investing called Smart Beta 2.0, which enables investors to choose and control the risks of these new benchmarks, and secondly, total transparency on the methodologies and compositions of the indices available on the platform.
Through its More for Less initiative, ERI Scientific Beta intends to promote a more transparent and efficient index market for the benefit of investors.
ERI Scientific Beta is taking initiatives that are at odds with those of traditional index providers by supplying information on its flagship smart beta indices free of charge, allowing investors to choose and control the risks of their smart beta investment, and, finally, by not asking institutional investors for fees on assets under management (AUM) to replicate its indices.
Tomas Franzén, chief investment strategist of Andra AP-fonden (AP2) and chairman of EDHEC-Risk Institute’s international advisory board, says: “The Scientific Beta initiative is a major mover of the whole concept of using more appropriate equity indices, or rather better constructed equity portfolios. It is important to better understand the dynamics of different alternative weightings and, at least, to be better prepared for market episodes when market-cap indices actually outperform. This initiative also is a very good example of the general need for solutions rather than products in investing.”
Professor Noël Amenc (pictured), director of EDHEC-Risk Institute and CEO of ERI Scientific Beta, says: “There is dual motivation behind the Scientific Beta initiative: to encourage a more transparent index market and to allow investors to better manage the risks of their investment in smart beta benchmarks.”
From April 22, EDHEC-Risk has been offering 30 flagship indices free of charge under the brand name Scientific Beta. These flagship indices represent popular smart beta strategies in the area of diversification, but ERI Scientific Beta will subsequently be producing indices for other strategies (style, fundamentally-weighted, factor replication, and optimal liquid). In a year's time, ERI Scientific Beta intends to have around 100 free flagship indices that are representative of all the possible smart beta choices. The provision of information on the flagship indices includes daily transparency and allows all investors to replicate the indices without charge.