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ASI launches first 'smarter beta' multifactor equity indices


Aberdeen Standard Investments launch SMARTER Beta multifactor equity indices

Aberdeen Standard Investments launch SMARTER Beta multifactor equity indices

Aberdeen Standard Investments (ASI) has launched its first range of proprietary SMARTER Beta multifactor equity indices to provide investors with a more sophisticated approach to smart-beta.

The SMARTER Beta range was created by the quantitative investment strategies (QIS) team and includes three core index series called Diversified Multifactor, High Income Multifactor and ESG Multifactor.

There are also five multifactor index variants of single factor offerings called Low Volatility Multifactor, Value Multifactor, Quality Multifactor, Momentum Multifactor and Small Size Multifactor.

These indices (and the funds tracking them) act as a third approach to investing that combine the benefits of both passive and active management. 

They will aim to outperform the equivalent market-capitalisation weighted index by 2% to 4% (gross of fees and trading costs) over the medium to long-term and are systematically implemented, so they retain all the benefits of indexation such as objectivity, transparency, and relatively low costs. No index fee will be charged.

All eight index series follow global, regional, and local equity strategies, including both developed and emerging markets (as applicable), and amount to over 100 indices accounting for various currency classes.

They are independently calculated and administered by IHS Markit, which provides critical information and analytics, with the intellectual property rights being retained and owned by Aberdeen Standard Investments. 

The team has also integrated ESG within the entire SMARTER Beta range through an ‘ESG Inside’ methodology using data from Sustainalytics, which provides ESG research and ratings.

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Sean Phayre, global head of quantitative investments, said: “The new equity indices are purely multifactor in approach as we believe that this approach helps to mitigate the effects of drawdowns relative to equivalent market-capitalisation weighted indices.

“Moreover, consistent exposure to RIPE Factors within equities provides potential to increase risk-adjusted excess returns by reaping the full benefits of factor diversification.”

David Wickham, global head of quantitative solutions, added: “With the smart-beta segment of the asset management industry being dominated by third-party index provider approaches, we decided to launch our exclusive SMARTER Beta multifactor equity indices to showcase the benefits of employing a proprietary smart beta approach that embeds active measures to enhance differentiation and risk-adjusted excess returns.

“For instance, our active measures result in a concentrated ‘best ideas’ index portfolio with a high degree of difference from rival approaches and the market-cap equivalent, thereby avoiding crowded and expensive trades.

The launch comes after ASI expanded its smart-beta range with a low volatility equity fund in March, managed by the QIS team.

The new range complements the group’s incumbent BETTER Beta range of enhanced indexation funds and mandates which are commonly used by sophisticated investors as a better alternative to, and substitute for, market-capitalisation weighted indexation.

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