FTSE, TOBAM create alternatively-weighted maximum diversification indices

Nov 18th, 2011 | By | Category: ETF and Index News

Index series seen as likely forerunner to ETF launch
Global index provider FTSE Group has teamed up with Paris-based quantitative asset manager TOBAM to launch of a new family of 8 indices designed to help investors avoid portfolio concentration.

FTSE, TOBAM create alternatively-weighted maximum diversification indices

FTSE, TOBAM create alternatively-weighted maximum diversification indices.

The indices, known as the FTSE TOBAM Maximum Diversification Index Series, seek to maximize a mathematical definition of diversification – the so-called Diversification Ratio – to provide investors with the most diversified portfolio possible in any given stock universe across global and domestic markets.

Index constituents are sourced from the FTSE All-World Index and are weighted so that each effective risk factor contributes equally to the risk of the portfolio, as opposed to a market capitalization weighted basis.

The portfolio construction methodology used in the construction of the index series has already been adopted by a number of institutional investors, including CalPERS, and it is expected that the indices will form the basis of a range of Exchange Traded Funds (ETFs).

The FTSE TOBAM Maximum Diversification Index Series forms part of FTSE’s range of alternatively-weighted indices which are being increasingly adopted by institutional investors as a means of balancing risk and reward, managing volatility and improving the efficiency of asset allocation.

Mark Makepeace, Chief Executive of FTSE said: “FTSE was the first index provider to launch alternatively-weighted indices, and continues to innovate to ensure that global investors can better diversify their equity investments. The underlying methodology of the FTSE TOBAM Maximum Diversification Index Series has already proved highly attractive to major institutional investors, and now, for the first time, investors will have access to a series of indices incorporating this approach.”

Yves Choueifaty, President and founder of TOBAM, commented: ”We are very excited by this partnership with FTSE, who are global leaders the provision of non market capitalization weighted indices, and more importantly believe the timing of this release makes a lot of sense for potential investors.”

The index series will initially consist of the 5 regional indices and 3 single-country indices. Their details and performance are listed below:

 

YTD

ITD

As of Nov 7th 2011

Perf

Vol

Ann Perf

Vol

FTSE Tobam MaxDiv Japan (JPY)

-5.10%

20.40%

3.10%

17.20%

FTSE All World Series Japan TR JPY

-15.40%

23.00%

-0.10%

23.40%

FTSE Tobam MaxDiv UK (GBP)

6.90%

16.20%

13.00%

16.80%

FTSE All World Series UK TR GBP

-3.60%

21.00%

7.50%

20.50%

FTSE Tobam MaxDiv USA (USD)

4.80%

19.10%

10.70%

17.60%

FTSE All World Series US TR USD

1.80%

22.90%

6.40%

21.30%

FTSE Tobam MaxDiv EuroBloc (EUR)

-9.40%

17.90%

8.70%

14.60%

FTSE All-World Eurobloc Total Return Index

-15.00%

26.90%

3.80%

22.70%

FTSE Tobam MaxDiv Dev Europe (EUR)

-2.90%

14.40%

10.20%

13.70%

FTSE All World Series Developed Europe TR EUR

-11.50%

29.90%

4.90%

24.90%

FTSE Tobam MaxDiv World Dev ex NA (USD)

-0.10%

16.00%

15.00%

14.10%

FTSE All World Series All World Developed Ex North America TR USD

-8.90%

23.80%

8.70%

20.80%

FTSE Tobam MaxDiv Dev AsiaPac Ex Japan (USD)

-5.10%

20.00%

18.40%

17.20%

FTSE All World Series Developed Asia Pacific Ex Japan TR USD

-6.80%

26.10%

15.90%

24.20%

FTSE Tobam MaxDivAll World Dev (USD)

-0.10%

14.30%

12.10%

12.60%

FTSE All World Series All World Developed TR USD

-3.80%

21.10%

7.60%

18.40%

 

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