The smart factor indices provided by ERI Scientific Beta, EDHEC-Risk Institute’s smart beta index provider offshoot, will be subject to the same free access as ERI Scientific Beta’s existing smart beta indices.
The 2,916 indices available on the Scientific Beta platform are accessible through free registration, providing access to the detailed methodology enabling the index to be replicated and to the back history of index compositions.
EDHEC-Risk Institute considers that transparency is indispensable in the area of indices, particularly when smart beta is involved, because the promise of outperforming cap-weighted indices is essentially based on simulated track records. It must be possible for these simulated track records to be challenged by the market and to do so there must be full transparency on the methodology and historical compositions.
Following a detailed study on the transparency of indices, EDHEC-Risk Institute says that numerous European UCITS exchange traded funds (ETFs), by tracking indices that are not transparent, are not respecting the European Securities and Markets Authority (ESMA) rules.
Noël Amenc, director of EDHEC-Risk Institute and CEO of ERI Scientific Beta, says, “The robustness of smart beta indices cannot be assessed with one, two, or even five years of live track record, as is the case for some of our indices. Simulated track records over a long period are essential, but it is even more important to be able to trust those track records, which presupposes full transparency enabling all the actors in the market to be able to share information on and criticism of the indices. Investors often choose indices today on the basis of confidential information, which is a bit like investing in publicly-quoted companies that do not publish their accounts.”