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By DailyAlts Staff Market cap-weighting of investments within a portfolio is a surefire way to be overexposed to overvalued stocks and underexposed to undervalued stocks. So called “smart beta” indexes were designed to correct this by focusing on a particular “factor,” such as value, size, momentum, or low volatility. But what if an index could integrate all four factors into a single portfolio? That would raise the stakes beyond “smart beta” and into the realm of Scientific Beta. On May 12, Global X Funds announced the release of four such ETFs, each designed to capture all four factors. The four global-spanning ETFs include: Global X Scientific Beta US ETF (NYSEMKT: SCIU ) – 0.35% expense ratio Global X Scientific Beta Europe ETF (NYSEMKT: SCID ) – 0.38% expense ratio Global X Scientific Beta Japan ETF (NYSEMKT: SCIJ ) – 0.38% expense ratio Global X Scientific Beta Asia ex-Japan ETF (NYSEMKT: SCIX ) – 0.38% expense ratio The ETFs’ weightings are determined by emulating ERI Scientific Beta multi-factor indexes. By combining all four factors together, Global X’s new Scientific Beta ETFs seek to smooth out the cyclicality of their returns and deliver more consistent performance than cap-weighted indexes. The ETFs aim to outperform the broad market, like active management; but at a fraction of the fees, like passive management. “We designed our multi-factor indices to give investors exposure to well-rewarded factors, while seeking to reduce unrewarded risks through diversification,” said Eric Shirbini, Global Product Specialist at ERI Scientific Beta, in a May 13 statement. “Our academic approach has resulted in creating one of the most robust smart factor indices on the market.” “ERI Scientific Beta’s methodology has been developed over years of thorough academic research, but so far its use has been mostly limited to institutional investors,” said Global X CEO Bruno del Ama. “We are excited to bring this premier smart beta strategy to a broader audience through the ETF structure.” Smart beta is one of the fastest-growing areas of the ETF industry. According to Morningstar, smart-beta ETF assets grew fourfold from $97 billion in 2009 to $402 billion in 2014. For more information, visit Global X’s micro-site for its range of Scientific Beta ETFs. Share this article with a colleague Scalper1 News
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