ERI Scientific Beta launches an integrated Long/Short offering

ID: 1524269
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(Thomson Reuters ONE) -

ERI Scientific Beta, the smart beta index provider, has announced the launch of
a long/short equity market neutral index, the Scientific Beta Developed Multi-
Beta Multi-Strategy Managed Volatility L/S Equity Market Neutral Index (x3.5).

The objective of the index is to seek exposure to long-term rewarded factors and
a reduction in non-rewarded risks, which associates the factor exposure with
good risk-adjusted performance, while at the same time aiming for perfect market
neutrality within a universe of large and mid-capitalisation companies from
developed countries. The allocation across smart factor indices is implemented
with the goal of minimising the volatility of the long/short spread. Return
amplification is obtained by the use of 3.5x leverage, maintaining volatility
below 8%.

While long/short multi-factor strategies will, by construction, harvest long-
term factor premia, such strategies may expose investors to unintended risks due
to poor diversification. This risk is all the greater in that long/short
strategy providers seek to maximise each factor''s spread through in-sample
optimisations that lack robustness, because the selected factor champions are
not persistent out of sample. This factor concentration also leads to highly
unstable market beta, because the factors naturally exhibit high levels of beta

Commenting on the launch, Professor Noël Amenc, CEO of ERI Scientific Beta, said
that, "Scientific Beta''s long/short offering corresponds to its investment
philosophy: risk management, factor diversification and top-down implementation.
The portfolio construction methodology prioritises risk management, which
guarantees the robustness of out-of-sample performance. It diversifies across
multiple factors to benefit from low correlations across factors rather than
concentration in factor champions, which lack consistency and are a source of

unstable performance and high turnover. The long/short solution is implemented
in a top-down manner to allow dynamic allocation across factors, guarantee
transparency and facilitate the search for market beta neutrality."

Scientific Beta implements its long/short strategy through a short position in
the cap-weighted reference index and a quarterly allocation to sub-portfolios in
the long leg with the objective of minimising the volatility of the long/short
spread under the constraint of factor exposure positivity, diversification
across factor indices and market beta neutrality. The long leg sub-portfolios
are designed to efficiently capture the long-run factor risk premia that have
been documented as being associated with factor tilts (value, momentum, low
volatility, high profitability, and low investment).


As part of its policy of transferring know-how to the industry, EDHEC-Risk
Institute has set up ERI Scientific Beta. ERI Scientific Beta is an original
initiative which aims to favour the adoption of the latest advances in smart
beta design and implementation by the whole investment industry. Its academic
origin provides the foundation for its strategy: offer, in the best economic
conditions possible, the smart beta solutions that are most proven
scientifically with full transparency of both the methods and the associated
ERI Scientific Beta, 1 George Street, #15-02, Singapore 049145. For further
information, please contact: contact(at), Web:



This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.

Source: EDHEC-Risk Institute via GlobeNewswire

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Date: 10/13/2017 - 05:03
Language: English
News-ID 1524269
Character count: 2421
Firma: EDHEC-Risk Institute
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