The strategic partnership, which combines ERI’s smart beta platform, ERI Scientific Beta, and Amundi’s expertise in ETFs, is being developed on the back of ERI Scientific Beta’s “Smart Beta 2.0” approach. This enables smart beta indices to be used as risk controls within multi-smart-beta allocation.
Valérie Baudson, global head of ETF & indexing at Amundi, said: “By partnering with ERI Scientific Beta we will be able offer our clients’ efficient indexed managed solutions including the very latest in smart beta index construction expertise.”
ERI Scientific Beta has also signed a global replication licence with Morgan Stanley allowing the bank to replicate Scientific Beta indices and also share information with all the counterparties of a fund or mandate relating to the replication of a Scientific Beta index.
Scientific Beta Analytics enables investors and fund managers to manage the benefits and risks of smart beta strategies and indices, themselves. Scientific Beta Indices users are then able to evaluate the consequences, in terms of performance and risk, regarding the different choices of benchmark construction criteria.
There are two levels of analysis offered by ERI: Firstly, standard analytics on performance and risk in both absolute and relative terms respectively. This allows investors to understand what the different strategies achieve and what their risk and return properties are. Secondly, advanced analytics including factor analysis, sector analysis, conditional performance (based on different market regimes), and the probability of outperformance.
Morgan Stanley will also be given the possibility of developing indexes using the entire Scientific Beta offering on the platform.
Hitendra Varsani, head of quantitative and derivative strategies at Morgan Stanley, said: “The significant interest and growth in smart beta strategies is driven by investors looking to improve risk-adjusted returns, manage volatility, and access more sophisticated weighting methodologies. Through our partnership with ERI Scientific Beta, investors will benefit from transparent smart beta index replication using Morgan Stanley’s market leading execution platform.”
Edhec-Risk has been highly vocal about access to free data within the indexing sector. It has prompted several commercial index providers to speak out against the sentiment, arguing that indexing is a commercial business and that there are high costs associated with maintaining and running an index.
Last week it announced it launched the long awaited multi strategy smart factor indices, which provides risk strategies in developed countries.