Edhec-Risk Institute, which recently criticised providers of smart beta indices, has launched a venture to design and license its own set of benchmarks.
With ERI Scientific Beta, the name of the venture, Edhec-Risk claims it will “revolutionise” the index world with a second-generation approach to smart beta.
ERI Scientic Beta will offer 2,442 customised indices, growing to 6,000 in 18 months, making it the world’s largest source of alternative benchmarks, Edhec-Risk says.
Also, complete information on 30 flagship indices will be made available free of charge online.
Information includes daily transparency and enables all investors to replicate indices without charge.
In a year’s time ERI Scientific Beta intends to offer around 100 free flagship indices. Access to the full range of indices will cost €10,000 per year.
Tomas Franzén, chief investment strategist of Swedish pension fund Andra AP-fonden and chairman of Edhec-Risk Institute’s international advisory board, says: “The Scientific Beta initiative is a major mover of the whole concept of using more appropriate equity indices, or rather better constructed equity portfolios. It is important to better understand the dynamics of different alternative weightings and, at least, to be better prepared for market episodes when market-cap indices actually outperform.
“This initiative also is a very good example of the general need for solutions rather than products in investing.”
Edhec-Risk recently said that smart beta investors were taking “considerable” risk because index promoters do not document or explicitly control risks within their smart beta offerings.
This “inadequate” levels of information and risk management about smart beta indices “calls into question” the robustness of their performance, Edhec-Risk said in March.
MSCI, a provider of smart beta indices, refuted the claim, at least for its own products (Funds Europe, April 2013).
Edhec-Risk Institute is part of Edhec Business School based in France.
©2013 funds europe