ERI Scientific Beta, the smart beta index provider offshoot of EDHEC Risk Institute, has announced that assets tracking its indices reached $16.5bn at the end of 30 June 2017. This represents an increase of 60% over the past year.
Scientific Beta indices give investors exposure to multiple equity risk premia that have robust academic support.
Commenting on the announcement, Noel Amenc, CEO of ERI Scientific Beta, said: ““Scientific Beta’s success over the past four years is due in no small part to the fact that its investment philosophy has proven attractive to major institutional investors throughout the world.
“This investment philosophy is based on three major principles: the importance of controlling the risks of the investment, because the alternative choice to the cap-weighted index means that one takes different risks, and these risks must be controlled; the essential diversification of the specific risks of the benchmark to produce robust risk-adjusted performance and avoid good long-term investment ideas being called into question by poor short-term performance due to poor diversification; and the concern for robustness, which implies that the design of an index must rely on academic consensus and not on innovations drawn from optimising the returns or the in-sample characteristics of the strategy proposed.”
An important driver of the growth in assets replicating Scientific Beta indices has been a favourable live track record. The first generation of Scientific Beta multi-smart-factor indices was created in 2013 and have delivered annualised outperformance of 2.2% on average versus a market cap-weighted benchmark comprised of all the stocks in the selection universe for the multi-factor indices.
The largest Europe-listed ETF to track a Scientific Beta index is the Amundi Global Equity Multi Smart Allocation Scientific Beta UCITS ETF (Euronext: SMRT) which follows the Scientific Beta Developed Multi-Beta-Multi-Strategy ERC Index. Launched in May 2014, the fund has €498 million in assets with a total expense ratio of 0.40%.
The index, which tracks large- and mid-cap equities from developed markets, has returned nearly 13% per annum over the past three years to 30 June 2017, compared to 5.8% returned by the MSCI World Index over the same period.