Scientific Beta September 2018 smart beta index performance report

Among the highlights of the September 2018 quarterly performance report for the ERI Scientific Beta indices:

  • ERI Scientific Beta offers single smart factor indices providing exposure to the six well-known rewarded factors (Mid Cap, Value, High Momentum, Low Volatility, High Profitability and Low Investment) that are also well-diversified in order to reduce the specific risks. This quarter, ending September 30, 2018, the best performing SciBeta Narrow High Factor Intensity Diversified Multi-Strategy (4-Strategy) index in the Developed universe was High Profitability with a relative return of 2.18% compared to the broad cap-weighted index, while Low Volatility posted the lowest relative return (-2.19%).

  • Based on its single smart factor indices, ERI Scientific Beta also offers multi smart factor indices. This quarter, the SciBeta Developed Multi-Beta Multi-Strategy 4-Factor EW index, the SciBeta Developed High Factor Intensity Diversified Multi-Beta Multi-Strategy 6-Factor 4-Strategy EW index and its Market Beta Adjusted (Leverage), Sector Neutral and combined Sector Neutral/Market Beta Adjusted (Leverage) versions posted relative returns of -1.52%, -0.95%, -0.49%, -0.44% and 0.01% respectively compared to cap-weighted indices. Since the beginning of the year, factor strategies have clearly not been performing well as the implicit sector bets proposed by the factors have a considerable impact on short-term performance. Moreover, it can be observed that the sector neutral versions of the multi smart factor indices are the ones that are resisting best to this under-performance of factors.

  • The Scientific Beta Multi-Beta Multi-Strategy 4-Factor EW indices, which were the first multi-factor indices to be offered by ERI Scientific Beta, show an average live annualised outperformance across all Scientific Beta Developed regions of 1.65% over their four-year live track record and an improvement in the Sharpe Ratio of 49.29% compared to their cap-weighted benchmark (the live analysis is based on daily total returns from December 20, 2013 to September 30, 2018 for all diversified multi-strategy indices that have more than three years of track record for all available developed world regions – USA, Eurozone, UK, Developed Europe, Developed Europe ex UK, Japan, Developed Asia Pacific ex Japan, Developed ex UK, Developed ex USA and Developed; the benchmark used is a cap-weighted portfolio of all stocks in the respective Scientific Beta universes).

About ERI Scientific Beta

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 risks.

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