ERI Scientific Beta to offer revolutionary alternative to fixed fees on assets under management

Written on 27 May 2016.

As a non-profit academic institution, ERI Scientific Beta has always sought to provide the best research with favourable conditions to allow investors to invest in the best conditions possible. That is how ERI Scientific Beta made EDHEC Risk Institute’s foundational pledge of transparency a reality. This transparency enabled the risks and robustness of strategies whose performance is essentially made up of simulated track records to be challenged. As such, all the data on ERI Scientific Beta’s flagship Scientific Beta Multi-Beta Multi-Strategy indices, with the notable inclusion of historical composition, has been made available to investors without restriction. The new pricing proposition is part of ERI Scientific Beta’s investor-friendly approach which has enabled it to attract more than USD 10bn in assets under replication for its smart beta indices in three years.

ERI Scientific Beta is offering this new pricing as an alternative to the traditional fixed fees on assets under management (AUM) of smart beta providers, whether asset managers or index providers. It involves a pure performance fees mandate that can be implemented at the request of an investor who only wishes to pay fees if the index has actually outperformed the reference cap-weighted index.

In practical terms, investors who choose this option from June 1, 2016, will pay zero fixed fees and will only pay variable fees if the flagship Scientific Beta Multi-Beta Multi-Strategy index outperforms the reference cap-weighted index.

This offer, with no fixed fees paid upfront and with the provider’s remuneration being based on what the provider actually delivers to the investor, is the only one of its kind in the world.

Commenting on this new model, Noël Amenc, CEO of ERI Scientific Beta, said, “Our rationale for this mandate offer is that smart beta providers’ claims on the quality and robustness of their strategies should materialise in their live performance. ERI Scientific Beta’s initiative is intended to provide consistency between the smart beta provider’s revenues and the quality of its offering. It is also testimony to the confidence we have in the performance of our smart beta indices, and notably our flagship Scientific Beta Multi-Beta Multi-Strategy indices, which have outperformed their cap-weighted equivalent by 4.51% on average since their live date .”

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