Assets replicating Scientific Beta's multi-factor indices reach USD 43bn


Scientific Beta sees its assets under replication grow by 72% in one year

Scientific Beta has announced that assets tracking its smart beta indices reached USD 43bn at December 31, 2018. Compared to December 31, 2017, this amount of assets under replication represents an increase of USD 18bn, corresponding to one-year growth of 72%.

This growth comes from the success of Scientific Beta’s multi-factor offerings. The Scientific Beta Multi-Beta Multi-Strategy Four-Factor EW indices, which were the first multi-factor indices to be offered by Scientific Beta, show an average live annualised outperformance across all Scientific Beta Developed regions of 1.49% over their five-year live track record and an improvement in Sharpe Ratio of 52.36% compared to their cap-weighted benchmark1.

Noël Amenc, CEO of Scientific Beta, said, “We have been very pleased with the continued growth of our assets under replication in conditions that were not necessarily favourable for some factor strategies. We are continuing to highlight the importance for our clients of risk management in the factor space.

Smart beta strategies are selected to provide explicit exposure to some well-rewarded factors (Value, Momentum, Low Volatility, Profitability, Low Investment, Size). These factors provide good risk-adjusted returns over the long-term but they are also exposed to a number of hidden or implicit risks that drive short-term performance, like for example sector risk or even a market beta bias. These risks can therefore cause big disappointments for investors if they are not understood and possibly managed. These issues have been underlined in a recent Scientific Beta publication entitled Misconceptions and Mis-selling in Smart Beta: Improving the Risk Conversation in the Smart Beta Space. One of our success factors is to analyse these risks, make them explicit and allow investors to hedge them or not depending on their fiduciary objectives and constraints.”

1The average live outperformance and improvement in Sharpe Ratio across all Scientific Beta developed regions of Scientific Beta Multi-Beta Multi-Strategy Equal-Weight indices is 1.49% for the outperformance and 52.36% for the improvement in Sharpe Ratio. This live analysis is based on daily total returns in the period from December 20, 2013 (live date) to December 31, 2018 for all diversified multi-strategy indices that have more than 3 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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