Aberdeen Standard launches smart beta multifactor equity index suite

Jul 19th, 2018 | By | Category: Equities

Aberdeen Standard Investments has unveiled the SMARTER Beta Multifactor Equity Indices.

Sean Phayre, global head of quantitative investments at Aberdeen Standard Investments

Sean Phayre, global head of quantitative investments at Aberdeen Standard Investments.

The suite includes three core index series – diversified multifactor, high income multifactor and ESG multifactor, plus five multifactor index variants of single factor offerings – low volatility, value, quality, momentum, and small size.

The series covers global, regional, and single-country exposures, including both developed and emerging markets, amounting to over 100 indices across various currency classes.

The new offering has been designed by the firm’s quantitative investment strategies team, which has been managing portfolios employing factor premia since 2005 and currently has over $48 billion in factor premia equity strategies.

Aberdeen Standard, has also integrated an ESG overlay within the entire SMARTER Beta range through an ‘ESG Inside’ methodology using data from Sustainalytics. This process excludes controversial weapons firms and those embroiled in ‘severe controversies’. The ESG Multifactor index family goes a step further by optimising index constituents based on ESG scores.

The SMARTER Beta multifactor equity indices are calculated and administered by IHS Markit.

Sean Phayre, global head of quantitative investments at Aberdeen Standard Investments, commented, “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.”

David Wickham, global head of quantitative solutions at Aberdeen Standard Investments, 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.”

Aberdeen Standard recently acquired the US operations of ETP issuer ETF Securities. The acquisition is set to enhance the firm’s presence in the US market and means it will be able to offer investment solutions across all vehicle types.

Following the acquisition announcement, Aberdeen Standard noted it will use the ETF platform (and exemptive relief) to grow its existing smart beta capability by launching new strategies within the ETF wrapper.

Aberdeen Standard has not yet commented on whether such ETFs will use the SMARTER beta indices as their underlying references.

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