Smart Beta index aims to leverage low volatility

October, 2017 Print


ERI Scientific Beta, a smart beta index provider set up by EDHEC Business School, has launched a long-short equity market neutral index, which aims to gain exposure to low volatility stocks with a strong leverage effect.

The full name of the index is the Scientific Beta Developed Multi-Beta Multi-Strategy Managed Volatility L/S Equity Market Neutral Index (x3.5). It aims to benefit from long-term rewarded factors in a universe of large and mid cap companies in the developed world. Returns are amplified through the use of 3.5 x leverage, keeping volatility below 8%. ERI Scientific Beta CEO professor, Noel Amenc, said: “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.”


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