EDHEC expands smart-beta index with Morgan Stanley, Amundi deals
ERI Scientific Beta, a smart-beta platform, has announced partnerships with Morgan Stanley and Amundi in a bid to enhance its platform for investors looking to move into the latest investment strategy.
The provider, part of the EDHEC-Risk Institute, a Paris-based academic body, said the agreements would help develop its aim to become the first provider of a smart-beta platform.
Smart beta, the systematic and rules-based strategy to equity investment, which focuses on exposure to beta factors, has been growing in popularity among institutional investors.
In response, EDHEC-Risk Institute launched its platform in the spring of 2013, which it said provided complete transparency on the methodology and compositions of the indices.
It also developed a Smart Beta 2.0 risk-management approach, which followed ERI Scientific Beta’s aim to provide the index industry with more academic rigour, transparency and risk control – all at a lower cost.
With Morgan Stanley, the firm said, it has signed a global replication license, which will see the US bank, and fellow index provider, replicate the smart-beta indices and have access to the evaluation tools and tracking methodology used within the indices.
With Amundi, the French asset manager, ERI Scientific Beta said the pair had agreed a strategic partnership that will see the construction of smart-beta passive investment solutions for institutional clients.
The firms said Amundi’s experience in index replication, and its work constructing exchange-traded funds (ETFs), would help them to build the investment solution.
Amundi will also obtain access to Scientific Beta’s tracking and evaluation tools used to develop the indices.
The growth in institutional demand for smart-beta strategies has grown.
Last week, research published by State Street demonstrated that more than half of institutional investors surveyed expected to move towards smart beta in the near future.
On the Amundi agreement, Noël Amenc, chief executive at ERI Scientific Beta, said the body was looking forward to helping the asset manager to develop smart-beta ETFs and indexed products.
Regarding the Morgan Stanley arrangement, he added: “With Morgan Stanley being one of the most prestigious names in international finance, this license is a major testament to the quality and investability of ERI Scientific Beta indices.”
Valérie Baudson, head of ETFs and indexing at Amundi, said: “By partnering with ERI Scientific Beta, we will be able to offer our clients efficient, indexed, managed solutions, including the very latest in smart-beta index construction expertise.”
Morgan Stanley’s head of quantitative and derivative strategies, Hitendra Varsani, said the growth in popularity of smart beta was driven by investors’ need for improved risk-adjusted returns and managed volatility.
“Through our partnership with ERI Scientific Beta, investors will benefit from transparent smart-beta index replication using Morgan Stanley’s market-leading execution platform,” he said.
For more on smart-beta strategies, see the March issue of IPE magazine