State Street, the ultimate parent of SPDR ETFs, has introduced a new suite of rules-based, dynamically adjusting indices.
The IntelliGXSM indices are designed to be investable and may be used as the underlying for financial products such as ETFs.
Launched under the brand name IntelliGX, the suite initially contains three families of indices providing exposure to private equity, and inflation-managed and risk-managed strategies.
Will Kinlaw, head of research and advisory for State Street Global Exchange, said the indices are not smart beta or thematic investing, rather these are investable indices that represent a new phase of dynamic investing.
He said, “We’re packaging an active strategy in rules-driven index, where security weights can change dynamically as relevant factors and big data indicators evolve.”
The GX Liquid Private Equity Index Series replicates private equity sector strategies through exposure to liquid public markets.
The GX Inflation-Managed Index Series uses daily inflation data to tilt towards assets that can offer protection when inflation is rising, while also seeking to preserve higher yield during lower inflation scenarios
The GX Risk-Managed Index Series apply market fragility and turbulence indicators to adjust exposure to risk premiums, such as the broad equity market, in order to capture long-run portfolio growth while also mitigating downside risk.[pullquote]“We’re essentially creating living indices that are flexible, evolving, transparent, and sensitive to new and meaningful factors.”
– Will Kinlaw, head of research and advisory for State Street Global Exchange.[/pullquote]
“We’re essentially creating living indices that are flexible, evolving, transparent, and sensitive to new and meaningful factors,” explains Kinlaw. “Rather than an index that constantly tilts towards one particular factor, like inflation, our index will lean into inflation-protected bonds when it sees inflation going up and nominal treasury bonds when inflation is going down.”
“This is a natural next step in the evolution of indices,” added John Plansky, global head of State Street Global Exchange. “Investors are looking for different sources of alpha. We’re integrating the worlds of academic theory and financial markets, and using our unique access to new and alternative data sets, to help asset owners and asset managers design investment strategies that meet their changing portfolio needs.”
The indices have been designed to be investable and thus may be suitable as underlying references for passively managed investment products such as ETFs.
Plansky continued, “We’re providing the recipe with which investors can make the meal in the form of an ETF or another investable product.”
It is yet unclear whether the new indices will be used by State Street Global Advisors, the firm’s asset management arm, to underlie SPDR ETFs.