ERI Scientific Beta

Scientific Beta Multi-Beta Multi-Strategy (MBMS) indices are outperforming cap-weighted indices, with year-to-date outperformance of 3.06%

A particularly volatile month of August on the markets has led to speculation on the impact of this volatility on the performance of smart beta strategies. It therefore seems to be an opportune moment to review the performance of Scientific Beta indices.

The Scientific Beta Multi-Beta Multi-Strategy flagship offering aims to offer very robust performance of smart beta indices in relation to their cap-weighted counterparts in all market conditions.

This robustness is due to both the balance of factor exposures and a good diversification of weighting schemes, which enables each of the smart factor indices that make up the Multi-Beta Multi-Strategy benchmark to benefit over the long term not only from stable exposure to the rewarded risk factors that they represent (Value, Size, Momentum, Low Volatility) but also a strong reduction in non-rewarded idiosyncratic volatility that is often very significant in traditional factor indices, which are very concentrated and poorly diversified.

It is this good diversification that is reflected in the performance of the Scientific Beta indices, which outperformed in both periods of market upturn at the beginning of the year and in more recent periods of strong volatility.

Thus, all the Scientific Beta Multi-Beta Multi-Strategy Equal Weight (EW) and Equal Risk Contribution (ERC) indices in all regions post positive relative year-to-date performance in comparison with their cap-weighted counterparts, with an average outperformance of 3.06%. During the month of August alone, these same indices again all posted positive performance, with an average outperformance of 1.59%.

Since inception (21 June 2002 for Multi-Beta Multi-Strategy EW indices and 19 December 2003 for Multi-Beta Multi-Strategy ERC indices), all of the Scientific Beta Multi-Beta Multi-Strategy EW and ERC indices have outperformed their cap-weighted counterparts, with an annualised average annual outperformance of 3.01%.

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