Elston Consulting unveils multi-asset smart beta indices

Feb 3rd, 2015 | By | Category: Alternatives / Multi-Asset

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Elston Consulting, a London-based investment research and advisory firm specialising in asset allocation strategy, has announced the launch of the Elston Strategic Beta Indices.

Elston Consulting unveils multi-asset smart beta indices

Maria Zahn, Head of Institutional Clients, Elston Consulting.

To date, smart beta strategies have typically focused on reconstituting single asset class indices using a factor-based approach or an alternative weighting scheme.

The Elston Strategic Beta indices, by contrast, offer outcome-oriented asset allocation strategies that are diversified across global asset classes using a risk-based approach.

The investment process provides a quantitative, methodical and objective approach to creating dynamic diversified growth strategies that isolate and capture shifting risk premia across asset classes.

The series, which is aimed at institutional investors, initially includes two indices:

Elston Strategic Beta Global Max Sharpe Index
Aims to provide a globally diversified multi-asset strategy with the highest risk-adjusted return in excess of the risk-free interest rate (Sharpe Ratio). The index is weighted according to a proprietary methodology based on an optimisation strategy using an algorithm to maximise the ex-post Sharpe Ratio of the portfolio subject to various constraints.

Elston Strategic Beta Global Min Volatility Index
Aims to provide a globally diversified multi-asset long-term growth strategy with minimised portfolio risk (minimum volatility). The index is weighted according to a proprietary methodology based on an optimisation strategy using an algorithm to minimise the ex-post combined volatility of the portfolio subject to various constraints.

The strategies are delivered using a pool of liquid, physically-backed exchange-traded funds (ETFs) that track indices of global asset classes.

Commenting on the launch, Maria Zahn, Head of Institutional Clients at Elston Consulting, said: “We are glad to bring innovative solutions to market for institutional clients. While there is growing popularity for low-cost ETFs, we think the real value is from combining them intelligently to deliver on client outcomes. We are delighted to be working with Solactive to bring this vision to market.”

Ranye Lu, Quant Research Consultant at Elston Consulting, added: “The investment theory and approach is similar to the risk-based approach of a diversified growth strategy. By using an index-based approach, the characteristics of the strategy should be comparable, with the certainty of lower costs. We believe this is a simpler way of delivering on an outcome whilst enabling better value for money.”

The indices are calculated by Solactive, a Frankfurt-based index provider.

Steffen Scheuble, CEO of Solactive, commented: “We welcome the opportunity to partner with Elston Consulting for the launch of the Elston Strategic Beta index series. Smart Beta index linked products have gained a lot of traction over the past few years, and Elston’s innovative approach aims to provide institutional investors with a straightforward way of accessing systematic rules-based diversified multi-asset strategies.”

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