SINGAPORE Exchange (SGX) is coughing up 186 million euros (S$280 million) in cash for a 93 per cent stake in Scientific Beta Pte Ltd, a smart beta index firm.
The strategic investment will strengthen the Singapore bourse operator's research-based index design capabilities as well as broaden its range of index products and clientele.
As of end Sept 2019, an estimated US$55 billion in assets owned by global institutions tracked Scientific Beta's indices. This has risen more than 10 times in four years, on the back of significant growth in factor investing. Assets using factor-based strategies are forecast to reach US$2.7 trillion this year, reflecting a compound annual growth rate of 17 per cent between 2011 and 2020.
SGX chief executive officer (CEO), Loh Boon Chye, said Scientific Beta brings a highly regarded research pedigree in the rapidly growing smart beta space, along with a strong suite of high profile clients in the US and Europe.
"Besides being complementary to our existing SGX Index Edge thematic and custom index capabilities, we also see new product opportunities based on Scientific Beta's indices," Mr Loh said.
Scientific Beta is established by EDHEC-Risk Institute (ERI Asia), an affiliate of EDHEC Business School. It is an independent index provider specialising in smart beta strategies, and boasts of having more than 60 asset owners and asset managers using Scientific Beta's indices to track or benchmark their smart beta investments.
Noël Amenc, CEO of Scientific Beta, said SGX provides a strong platform for Scientific Beta to expand regionally and across client segments.
The Singapore holding of the EDHEC Endowment Fund (SHEEF), which is owned by the endowment fund established by EDHEC Business School and its alumni, will own a 7 per cent stake in Scientific Beta and retain a board seat at Scientific Beta after the acquisition.
On Thursday, SGX also reported Q2 FY2020 net profit of S$99.0 million, up from S$96.5 million a year ago. Revenue stood at S$230.9 million, versus S$224.2 million previously. Earnings per share was 9.2 Singapore cents, from 9.0 cents in the corresponding period last year. The board of directors has declared a dividend of 7.5 Singapore cents, unchanged from a year ago, payable on Feb 10.