Sean Phayre

Aberdeen Standard Investments has announced the launch of its first range of proprietary and exclusive SMARTER Beta1 multifactor equity indices, including five indices denominated in Australian dollars (AUD). Designed to provide investors access to a more sophisticated smart beta approach, the indices employ active measures to enhance differentiation and risk-adjusted excess returns.

The SMARTER Beta range of multifactor equity indices, devised by the Quantitative Investment Strategies (QIS) team, includes three core index series – Diversified Multifactor, High Income Multifactor and ESG Multifactor – plus five multifactor index variants of single factor offerings – Low Volatility Multifactor, Value Multifactor,  Quality Multifactor, Momentum Multifactor, and Small Size Multifactor.

The eight index series follow global, regional, and local equity strategies, including both developed and emerging markets (as applicable), and amount to over 100 indices accounting for various currency classes. The SMARTER Beta multifactor equity indices are independently calculated and administered by IHS Markit, a world leader in critical information and analytics, with the intellectual property rights being retained and owned by Aberdeen Standard Investments. The performance of the new range of indices is published daily on Bloomberg and Thomson Reuters.

The Global Equity TR index (AUD) is available in three variants; High Income Multifactor, ESG Multifactor and Low Volatility Multifactor. The Australia Equity TR Index (AUD) is available in two variants; ESG Multifactor and Low Volatility Multifactor.

Sean Phayre, Global Head of Quantitative Investments at Aberdeen Standard Investments, comments: “The new equity indices are purely multifactor in approach as we believe that this approach helps to mitigate the effects of drawdowns relative to equivalent market-capitalisation weighted indices. Moreover, consistent exposure to RIPE Factors2 within equities provides potential to increase risk-adjusted excess returns by reaping the full benefits of factor diversification. The QIS team has been managing portfolios employing factor premia since 2005 and now has over $37.5 billion* in factor premia equity strategies.”

David Wickham, Global Head of Quantitative Solutions at Aberdeen Standard Investments, added: “With the smart beta segment of the asset management industry being dominated by third-party index provider approaches, we decided to launch our exclusive SMARTER Beta multifactor equity indices to showcase the benefits of employing a proprietary smart beta approach that embeds active measures to enhance differentiation and risk- adjusted excess returns. For instance, our active measures result in a concentrated ‘best ideas’ index portfolio with a high degree of difference from rival approaches and the market-cap equivalent, thereby avoiding crowded and expensive trades.”

“We’ve also integrated ESG within the entire SMARTER Beta range through an ‘ESG Inside’ methodology using data from Sustainalytics, a leader in ESG research and ratings. Our integration of ESG utilises our extensive research conducted on ESG smart beta in tandem with Sustainalytics and the University of Oxford’s Smith School of Enterprise and the Environment.”

Andrew Heyden, Institutional Director at Aberdeen Standard Investments, said: “The new indices give Australian investors a proven and more sophisticated smart beta investment approach that can be used to further diversify portfolios and enhance differentiation as well as risk adjusted returns.

“At Aberdeen Standard Investments Australia we are continually looking at new investment solutions to meet local clients’ needs. The use of multifactors and embedded ESG in a smart beta solution provides a complimentary option to our wide range of existing active strategies for institutional investors”.

The SMARTER Beta multifactor equity indices (and those funds tracking them) act as a third approach to investing that combine the benefits of both passive and active management. The indices aim to outperform the equivalent market-capitalisation weighted index by 2 to 4% (gross of fees and trading costs) over the medium to long-term and are systematically implemented, so they retain all the benefits of indexation such as objectivity, transparency, and relatively low costs. As an asset management business, Aberdeen Standard Investments does not charge any index fees to its investors.

Aberdeen Standard Investment’s SMARTER Beta multifactor equity indices complement the business’ incumbent BETTER Beta3 range of enhanced indexation funds and mandates. These BETTER Beta strategies are commonly used by sophisticated investors as a better alternative to, and substitute for, market-capitalisation weighted indexation.

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