EDHEC-Risk Institute has conducted two new studies, commissioned by ETF issuer Amundi, that investigate the theoretical and practical challenges involved in harvesting risk premia in fixed income markets. Bruno Taillardat, Head of Smart Beta & Factor Investing at Amundi, said, “The increasing adoption of smart beta and factor-based solutions, particularly in the area of fixed income investment, represents an exciting challenge for asset managers seeking to design the right solutions to address clients’ needs.”

About two-thirds of ETF users (67%) are using the vehicles to gain exposure to smart beta strategies, a considerable increase compared to 49% in 2014, according to the latest results of the 10th EDHEC European ETF and Smart Beta Survey. Professor Lionel Martellini, director of EDHEC-Risk Institute, said: “The survey confirms that transparency and the possibility of making explicit choices on risk exposures are key drivers behind investors’ growing appetite for smart beta.”

Desjardins Global Asset Management has launched an ETF targeting global stocks excluding Canada and the US which have been weighted to amplify exposure to a selection of equity market risk factors – value, momentum, size and low volatility.

ERI Scientific Beta has announced the launch of a series of new multifactor smart beta indices. Noël Amenc, CEO of ERI Scientific Beta, said the Multi-Beta Diversified High Factor Exposure series uses a top-down approach to maximise explicit risk control and diversification while taking interactions between factors into account. The methodology uses a High-Factor-Exposure filter which eliminates stocks that have exposures to factors other than the desired factor. The indices may serve as the underlying for future investment products such as ETFs.

MSCI has reported strong net inflows of $17.5bn to ETFs linked to its factor indices between 1 January and 30 September 2016. With global factor-based ETFs attracting nearly $51bn in net inflows over this period, MSCI-linked ETFs have captured approximately one third of total net flows. Diana Tidd, MSCI’s Head of Index Products, commented: “Our innovative factor index offering, combined with the strength of our top quality brand, continue to make MSCI indices the first choice of ETF providers around the world.”

Smart beta exchange-traded funds are meeting investors’ expectations, with a satisfaction rate of 86%, according to a survey of 180 European investment professionals conducted by EDHEC-Risk Institute and commissioned by Amundi ETF. The main motivation for investing in smart beta ETFs is the capturing of factor premia, with value, low volatility and size factors considered as the most likely to be rewarded. Fannie Wurtz, Managing Director of Amundi ETF, Indexing & Smart Beta, commented: “The findings of this survey demonstrate that investors’ appetite for smart beta ETFs will keep on growing in the coming years.”

Assets tracking the indices of smart beta index provider ERI Scientific Beta, a commercial venture of EDHEC Risk Institute, has reached the $10bn milestone. Part of these tracking assets can be attributed to a range of exchange-traded funds from providers such as Morgan Stanley, ETF Securities, Amundi and Global X Funds. Noël Amenc, CEO of ERI Scientific Beta, commented in a statement: “ERI Scientific Beta’s approach to smart beta index provision is based on three guiding principles: more academic rigour, more transparency, and less cost. It is extremely gratifying to see that these principles have proven to be attractive to our clients.”

Smart beta index provider ERI Scientific Beta has announced a fresh approach to index pricing that may disrupt the traditional model of fixed fees on assets under management. Investors will be able to request a pure performance fee structure that levies charges only if the index has actually outperformed its cap-weighted benchmark. The fee structure is available on the Scientific Beta Multi-Beta Multi-Strategy indices. Noël Amenc, CEO of ERI Scientific Beta, said: “Our rationale for this mandate offer is that smart beta providers’ claims on the quality and robustness of their strategies should materialise in their live performance. ERI Scientific Beta’s initiative is intended to provide consistency between the smart beta provider’s revenues and the quality of its offering.”

All four smart beta exchange-traded funds from New York-based ETF provider Global X Funds have surpassed their market cap-weighted benchmarks one year after their initial launches. The ETFs which provide core multi-factor (value, size, momentum and volatility) equity exposure to the US, Europe, Japan, and Asia ex-Japan through tracking EDHEC-Risk Institute’s Scientific Beta Indices, all outperformed their benchmarks on both return and risk metrics. Jay Jacobs, Director of Research at Global X, commented: “We fully believe that multi-factor funds are the latest evolution in smart beta investing. The rigorous research put into these strategies, combined with the low fees and increased tax efficiency associated with ETFs, represents an attractive alternative to expensive actively managed mutual funds.”

Smart beta strategies are effective at isolating and capturing risk premia, according to Scientific Beta, a commercial venture of EDHEC Risk Institute. The firm’s latest research paper, “Smart Beta is not Monkey Business”, confirms that investors are able to use smart beta investment products, such as certain exchange-traded funds, to achieve specific factor exposures. The paper refuted claims that all smart beta strategies gain exposure to the size factor and that any out-performance is solely attributable to this exposure, and that similar results may be obtained by a random, so-called “monkey” weighting strategy.