Singapore Exchange (SGX) has announced the acquisition of smart beta index specialist Scientific Beta in a move that aims to scale up its own data and index business.

Noël Amenc, CEO of ERI Scientific Beta.

According to the terms of the agreement, SGX will pay €186 million in cash for a 93% stake in Scientific Beta.

Established in December 2012 by EDHEC-Risk Institute, an affiliate of EDHEC Business School, Scientific Beta is headquartered in Singapore with offices in France, the UK, and the US.

The company provides investable smart beta indices that draw upon EDHEC Risk Institute’s research in portfolio construction and risk allocation.

The indices employ various strategies, such as alternative weighting methods and multi-factor overlays, to achieve targeted risk and reward objectives.

Assets tracking Scientific Beta indices have expanded rapidly in recent years, growing more than ten times in under four years to reach $54.7 billion, as of 30 September 2019.

An important driver of the firm’s success has been the favourable performance of its flagship “multi-beta multi-strategy” indices which have outperformed their market-cap-weighted benchmarks since inception. Offered as both four-factor and six-factor combinations, the indices aim to maximize the diversification of strategy-specific risks by combining a range of popular diversification strategies.

Scientific Beta notes that 30% of assets currently tracking the firm’s indices are integrating environmental, social, and governance (ESG) dimensions, highlighting the growing demand for sustainable investing. To cater to this demand, Scientific Beta began introducing ESG and low carbon versions of its flagship indices in September last year.

Scientific Beta already enjoys a growing presence in the ETF industry with its indices underlying funds from issuers such as Morgan Stanley, Amundi, and Global X. With ESG expected to be a leading driver of ETF growth in the coming year, especially in Europe, the firm has positioned itself as an appealing option for issuers looking to combine ESG and factor investing themes.

Following the integration of Scientific Beta within SGX, the business will maintain its collaboration with EDHEC Business School as well as the key management team led by Noël Amenc, CEO of Scientific Beta.

Loh Boon Chye, Chief Executive Officer of SGX, commented, “The acquisition of Scientific Beta marks an important step in the evolution of our index business. Scientific Beta brings a highly regarded research pedigree in the rapidly growing smart beta space, along with a strong suite of high profile clients in the US and Europe.

“Besides being complementary to our existing SGX Index Edge thematic and custom index capabilities, we also see new product opportunities based on Scientific Beta’s indices. We are excited to welcome Scientific Beta into our SGX family and work alongside Noël and the rest of the team.”

Amenc added, “As Asia’s most international exchange and a global leader, SGX provides a strong platform for Scientific Beta to expand regionally and across client segments. Together we will drive continued development in the smart beta and sustainable finance space, leveraging Scientific Beta’s academic rigour and SGX’s product development capabilities. We look forward to working closely with the SGX team as we embark on this next step of our journey.”