The MS Scientific Beta Global Equity Factors UCITS ETF (GEF LN) has recorded significant inflows, gaining approximately $270 million in net new assets in Q3 2017.
State Street Global Advisors (SSGA), the asset manager behind the SPDR range of ETFs, has announced future changes to the name and index of the SPDR Morgan Stanley Technology ETF.
The Securities and Exchange Commission (SEC) appears to be sending out contradictory signals regarding the use of leveraged ETFs following the approval and subsequent review of two new quadruple leveraged ETFs.
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.
Morgan Stanley Smith Barney has agreed to pay an $8m penalty and admit wrongdoing to settle charges related to its selling of single inverse ETF investments to advisory clients. The US Securities and Exchange Commission’s order found that Morgan Stanley did not adequately implement its policies and procedures to ensure that clients understood the risks involved with purchasing inverse ETFs, including the unsuitability of inverse ETFs as long-term investments.
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.”
For many, the investment holy grail is a strategy that will outperform across all stages of the market cycle. Multi-factor smart beta strategies are one of the more recent attempts to achieve this. The solid recent performance of the Scientific Beta Multi-Beta Multi-Strategy Index, which underlies exchange-traded funds from Amundi and Morgan Stanley, appears to suggest that multi-factor strategies can indeed deliver in some of the most testing environments as well in more benign periods.
Assets tracking the smart beta indices of the EDHEC-Risk Institute have risen to over $8bn, with the success of their Multi-Beta Multi-Strategy offering, available in ETF format from Amundi and Morgan Stanley, helping to drive triple-digit growth over the past 12 months. Noël Amenc, CEO of ERI Scientific Beta, commented: “Smart beta is a commoditisation of two essential contributions from modern portfolio and asset pricing theory, namely allocating to factors that are well rewarded over the long term and reducing unrewarded risks through diversification. These two ingredients are the core of the Smart Beta 2.0 offering marketed by Scientific Beta.”
One of the toughest challenges facing smart beta investors today is in determining how these strategies will perform over changing market environments. A new research paper from Scientific Beta offers investors guidance on what to look for when assessing ETFs and indices based on these strategies. According to Scientific Beta, their publication “highlights the importance of a limited choice of factors with simple definitions to avoid the temptations of factor mining or factor fishing, which are among the main causes of the lack of relative out-of-sample robustness of smart beta strategies that are based on factor exposures. It also underlines the importance of allocating between smart factors that have decorrelated excess returns with respect to cap-weighted indices in order to favour the absolute robustness of the smart beta strategies implemented.”
London-based exchange-traded fund provider Source and investment bank Morgan Stanley have teamed to launch the Source Morgan Stanley Europe MEMO Plus UCITS ETF (EMSE), an ETF which aims to outperform the broad European equity market by exploiting one of the most persistent patterns in equity markets – the so-called “month-end effect”. Listed on the Deutsche Börse, the strategy combines continuous exposure to European equities with additional exposure, of 2x leverage, around month-end. In simulations over the past 13 years, the strategy has outperformed the MSCI Europe Index by an average 6.0% per annum.