Mr Schneller is an experienced client-facing quantitative researcher, having been a senior member of the Research Group and Investment Solutions Group at Dimensional Fund Advisors since 2017, a leading factor-based asset management firm. During his time with Dimensional Fund Advisors, Warwick led research initiatives and provided thought leadership, analysis and client education on a wide range of investment-related topics across Australia and New Zealand.

Susan Rodgers said Mr Schneller brings strong academic credentials along with senior investment research and strategy experience in systematic equities, which he has achieved locally and internationally.  “It is exciting to have Warwick join the Sydney office, to help me continue the expansion of Scientific Beta’s footprint in the region. I’m thrilled at his appointment,” she said.

“As a senior member of the Investment Specialist Team at Scientific Beta, Warwick will work closely with research, index construction, and business development, linking investors to Scientific Beta’s global leading research and index design capabilities,” she said.

“In addition to Warwick’s appointment, Scientific Beta is expanding its business in Australia. As an example of that, Future Group has formed a new partnership with Scientific Beta in Australia to develop an international equities strategy that is aligned with sustainable investment principles and members’ best financial interest.”

Mr Schneller holds a Ph.D. in Finance from The University of New South Wales and is a CFA charterholder. His educational background includes a Masters in Finance from Bond University and a Bachelor of Agricultural Economics (Hons) from Sydney University.  Additionally, Mr Schneller is an adjunct lecturing in finance at the University of New South Wales. Warwick is a frequent speaker at conferences and client events. His earlier career included forex trading at Macquarie Group.

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Erik Christiansen

Investing in emerging markets (EM) equities offers diversification and adopting a multi-factor approach provides access to well-grounded return premia, while significantly reducing volatility, according to new figures from global index provider and research house Scientific Beta.

These additional return benefits are demonstrated in the long term, but also in more recent years. While the outperformance over standard cap-weighted benchmarks has been above 3% p.a. in the last two decades, it has been above 7% over the last one and three years.

“The attraction of investing in EM is multifaceted,” said Susan Rodgers, Scientific Beta’s Business Development Director for Australia and New Zealand.  “EM economies generally experience faster growth compared to developed markets (DM), which can potentially lead to higher returns on equities, albeit with higher volatility. Over the period since 2001, EM equities have outperformed developed markets on a cumulative basis. Furthermore, this asset class provides diversification benefits to investors, as its returns have shown low correlation with those of traditional asset classes.”

“Our multi-factor EM strategy has outperformed the broad cap-weighted benchmark with lower volatility over the short and long term,” said Erik Christiansen, Head of Investment Solutions for Scientific Beta, as displayed by the performance table below.

Included in the multi-factor strategy are six well-established equity factors: value, momentum, size, low volatility, profitability, and low investment. “These factors have been critically reviewed and judged robust by financial practitioners and academics and have consistently delivered reliable and well-documented systematic premia across various geographical and market settings,” he said. “In addition, these factors are independent from one another, offering a powerful toolkit for crafting an EM equity factor strategy that can deliver robust returns to investors.”

Scientific Beta’s four-step investment process involves constructing factor-specific portfolios, avoiding negative exposures to rewarded factors by enhancing factor intensity, promoting diversification, replicability and investability by the use of liquidity rules, and equally weighting factor-specific portfolios to benefit from their decorrelation.

As the table below shows, while trading costs remain higher in Emerging Markets than in Developed ones, the trading costs of a multi-factor strategy are an order of magnitude lower than the return benefits it brings.

“This approach enables us to build an EM multi-factor portfolio with strong and well-balanced exposures to all six rewarded factors, which delivers robust risk-adjusted performance over the long-term. In addition, an EM multi-factor investment strategy delivers a well-balanced portfolio, leveraging the benefits of decorrelation and the cyclicality of premia.”

“Importantly, our high factor intensity filter removes companies that score poorly on a multi-factor score. The result is to meaningfully raise the factor intensity, by avoiding the dilution effect of stocks that are winners on one factor but bring negative exposures to the others. This approach proves particularly valuable in a multi-factor portfolio, where investors seek exposure to all rewarded factors to improve returns compared to market-capitalisation-weighted indices,” he said.

Scientific Beta builds its indices within regional building blocks, with separate underlying portfolios for example for India and China. This enables accommodating investors who wish to finetune their geographic exposures, such as with an Emerging ex-China approach.

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