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"Smart Beta" Manager of the Year
Paris-based Amundi has grouped its smart beta, exchange-traded funds and indexing businesses together to oversee €54 billion in client assets by the end of March 2016. With a 30-year history in index replication, the company said it has built a “large spectrum of expertise”. Its first smart beta track record dates back to 2007 with the launch of its minimum variance portfolio. Amundi’s definition of smart beta strategies covers factor investing and alternative weighting systems. While the three units work together, investors have a range of options available, including open-ended funds, mandates and bespoke solutions. In 2016, following the launch of a multi-smart-beta passive solution two years earlier, Amundi has launched the same strategy focusing on European equities via an ETF. The firm partners with Edhec-Risk and MSCI for knowledge sharing. In the long term, all flagship Scientific Beta Multi-Beta Multi-Strategy indices post positive excess return compared to broad cap-weighted indices, Amundi said.
In the 12 months to the end of May 2016, AQR increased its European assets under management by 24% to $20.5 billion, with much of this growth coming from its smart beta products. However, AQR’s tweak to the approach, run through the Style Premia fund, saw assets more than double to $2.3 billion. This fund has no natural benchmark, as it is a total return strategy “but its performance, risk and correlations have been impressive compared with almost any benchmark return,” AQR said. It invests long and short globally across stocks, bonds, commodities and currencies, seeking to capture alternative returns while trying to hedge out risk of any one market or asset class. Its three-year annualised performance of 8.8% with a Sharpe ratio of 1.1, beat both the MSCI World index and a hypothetical global 60/40, by at least two percentage points, with a zero correlation to equities. AQR’s online library contains more than 300 white papers and articles, along with the data upon which its strategies and analysis is based. In 2015, the firm partnered with London Business School to create the AQR Asset Management Institute and invited clients to events it hosted.
BMO Global Asset Management
After working on his theories at Europe’s largest pension fund, ABP, for more than five years, the head of BMO systemic strategies unit, Erik Rubingh, has finessed the approach to create what the firm calls True Styles. BMO said it is unique in the market and concentrates on four factors within its global equity strategy: true value, true momentum, low volatility and true growth at a reasonable price; an approach that involves assembling portfolios of stocks that meet the classic criteria for those styles, then swapping out other characteristics – such as an accidental geographic exposure, for example – that might have crept in. BMO said in its submission: “A naive approach to smart beta has the potential to deliver disappointing investment returns.” Taking the True Styles approach “removes much of the time varying nature of the style returns,” the manager said. The four factors also have low correlations between them. The F&C Institutional Global Equity Fund, which uses a long-only style premia strategy, outperformed the MSCI World TR Index by 2.48% over three years on an annualised basis to the end of May 2016.
After launching the first minimum variance ETF in 2011 and smart beta commodity ETF in 2013, Ossiam is breaking more new ground with an ETF based on environmental, social and governance factors through a smart beta lens in 2016. In the past 12 months, two of its newly launched flagship ETFs – formulated with Nobel Prize winner Professor Robert Shiller – reported combined assets of €299 at the end of May. The larger fund has made a 4.15% return in just under a year, compared to 0.23% by the S&P500.
Research Affiliates’ Fundamental Index, launched in 2005, has come to be seen as one of the world’s first smart beta products. Since then, it has launched RAFI strategies that cover fixed income, commodities and pushed into other equity funds. At the end of March 2016, assets managed using strategies based on the group’s RAFI concept totaled $160 billion globally, with 80 products available in Europe through 18 affiliates in the region. In the past 12 months, Research Affiliates in Europe has worked with Source ETF and FTSE Russell to expand its income index series in response to investor demand, along with a collaboration with Legal & General Investment Management and the UK’s Pension Protection Fund to implement a low volatility strategy aiming at increasing risk-adjusted returns.