LOIM was among the pioneers of Smart Beta strategies in fixed income four years ago. Since then, LOIM has extended its innovative approach to other asset classes and at the end of December 2013 managed $5 billion on behalf of clients in a range of fixed income, equity and commodity Smart Beta strategies.
“We’ve built a range of Smart Beta strategies designed to avoid the risk-concentration that market-capitalization suffers from,” said Jérôme Teiletche, Head of LOIM’s Solutions Group. “Our philosophy aims to create well-diversified and scalable portfolios that offer better risk-adjusted returns over time.”
LOIM’s Smart Beta index performance is calculated by Bloomberg Indexes, Russell Investments and BNP Paribas for the fixed income, equity and commodity strategies respectively. Available for the first time through the Bloomberg Professional service, a leading financial information platform used by more than 319,000 subscribers, financial and business professionals now have fully transparent access to performance statistics of the 14 strategies.
"The LOIM Smart Beta index family offers an attractive complement to traditional market capitalization-driven benchmarks," said Srikant Dash, head of Bloomberg Indexes. "We are pleased to use our custom index capabilities to provide independent calculations for LOIM’s fixed income strategies and to bring Bloomberg’s distribution and analytics to help give exposure to this index family."
Traditional market capitalization, LOIM believes, doesn’t adequately diversify portfolio risk or return opportunities.
This, LOIM believes, can create problems for investors by exposing them to unintended risks – whether concentrating exposure in a few companies, investing in commodities after prices have soared or lending to the most indebted issuers in fixed income, regardless of their ability to repay debts.
LOIM’s Smart Beta strategies aim to solve these problems by allocating risk rather than capital. This lets investors target better risk-adjusted returns over the long term and true diversification across a full market cycle while offering a more efficient way to capture risk premiums.
