A portfolio management arm of [tag|Rothschild Group|]Rothschild Group[/tag] has teamed up with Source, a provider of exchange traded funds, to launch a new ETF tracking a risk-based set of market indices, an example of what is sometimes called “smart Beta” investing.
A portfolio management arm of Rothschild Group has teamed up with Source, a provider of exchange traded funds, to launch a new ETF tracking a risk-based set of market indices, an example of what is sometimes called “smart beta” investing.
Risk-Based Investment Solutions, a wholly-owned subsidiary of Rothschild Group, and Source rolled out what is called the Source R Equal-Risk European Equity UCITS ETF. In November last year, RBIS and Markit, a third-party calculation firm, launched a range of indices called the R Risk-Based Equity Index Series. This is made up of five indices tracking the US, UK, Japanese, and global developed market equity sectors.
The index series and this new ETF are designed to let investors tap into benefits of a risk-based methodology, contrasting with traditional cap-weighted approaches. This is an example of a trend known as “smart beta”. While the definition of smart beta varies, one fairly common definition is that a smart beta fund, for example, tracks a style index or uses a mechanical investing strategy to obtain the returns associated with a particular strategy without the cost of active management. One example might be an index tracking returns obtained by value investing. Late last year, Invesco PowerShares said demand for such products in Europe is growing rapidly. Last week, Barclays, the UK bank, rolled out a product fitting this trend (see here).
Commenting on its RBIS subsidiary, Rothschild Group said it is a “new pillar” of the blue-blooded firm’s asset management division. It cited RBIS's risk-based approach to creating client portfolios and said it offers more efficient options than more traditional ways of managing money.
“Pension funds and institutional investors are increasingly focused on maintaining an appropriate risk profile whilst meeting investment targets and RBIS allows the Rothschild Group to propose the adequate risk-based offering,” Jean-Louis Laurens, general partner and global head of asset management at Rothschild, said.
There are four main arms to Rothschild Group - Global Financial Advisory, Wealth Management & Trust, Institutional Asset Management and Merchant Banking - as well as specialist financial businesses.