Sabrient Systems, an independent equity research firm, and Thomson Reuters, a leading financial information provider, have collaborated to create two alpha-generating, low-volatility equity indices.
The indices, the Thomson Reuters/Sabrient Sensible Growth Low Volatility Index, a long/short index, and the Thomson Reuters/Sabrient Sensible Growth Index, a long index, have been designed for use by ETFs, as well as mutual funds and asset managers. Both indices have a validated 10-year historical performance backtest.
The indices employ a proprietary formula for distinguishing between undervalued and overvalued companies based on short and longer-term growth metrics. They combine Sabrient’s fundamentally-based approach of picking growth and value stocks with Thomson Reuters’ experience of calculating real time indices.
“Our collaborative agreement allows our clients to leverage Sabrient’s specialised intellectual property and, with these new products, to continue to generate alpha despite today’s tough market conditions,” said Steven Carroll, Head of Thomson Reuters Indices.
“Working with such a well-respected firm provides our clients with third party validation and branding through Thomson Reuters’ independently backtested results,” said Scott Brown, President of Sabrient. “We perceived an increased need for low-volatility products in the market and wanted to provide ETF distributors and fund managers with alternative indices that leverage a unique methodology applied across large quantities of data, to generate robust risk-adjusted returns.”
The Thomson Reuters/Sabrient Indices employ several quantitative factors, including quality of earnings, to rank all US listed stocks by current and prospective growth and valuation. The top 100 of these stocks are equally weighted to form the TR/S Sensible Growth Index whilst the top 50 and bottom 50 are equally weighted to form the TR/S Sensible Growth Low Volatility Index. Index constituents must be covered by at least 3 analysts and have a market capitalisation of at least $150 million in order to be included in the index.
A number of existing Sabrient indices are already tracked by ETFs including the Sabrient Defensive Equity Index tracked by the Guggenheim Defensive Equity ETF (NYSE Arca: DEF), the Sabrient Multi-cap Insider/Analyst Quant-weighted Index tracked by the Direxion All Cap Insider Sentiment ETF (NYSE Arca: KNOW) and the Sabrient Global Balanced Growth Index tracked by the iShares Balanced Growth CorePortfolio ETF (TSX: CBN.TO).