Fri, 01/02/2013 - 06:21
Russell Indexes has launched the Russell High Efficiency Defensive Indexes, a new index series extending the popular Russell Defensive Index methodology.
These new indices, similar to the Russell Defensive Indexes, combine various economic and market risk factors, creating a “stability score,” to help investors identify high quality, low volatility stocks.
The new indices complement the market cap weighted Russell Defensive Indexes, as the actual over -or under-weighting of stocks within the High Efficiency Defensive Indexes is determined in direct proportion to their stability score, not to their size.
In addition, the new indices are the first and only series of low volatility benchmarks to offer low targeted tracking error to the industry leading Russell benchmarks, a key benefit to large pension plans, foundations and endowments.
With more than USD3.9trn benchmarked to Russell’s family of core indexes, Russell captures approximately 68 per cent of the benchmark market share for all US institutional equity products, more than all other US indexes combined.
"Since their introduction in 2011, the Russell Defensive Indexes have appealed to investors who want to identify stocks on the basis of economic stability measures,” says Rolf Agather (pictured), managing director of global research and innovation at Russell Indexes. "By building on this concept, the Russell High Efficiency Defensive Indexes provide an additional option for investors interested in the Defensive Index methodology but seeking a more direct link between a company’s stability factor and its weight within the portfolio and a lower tracking error relative to current low volatility indexes.”
The unique weighting approach of the Russell High Efficiency Defensive Indexes and their ability to provide low tracking error to a Russell benchmark index is made possible through collaboration with Westpeak Global Advisors, an independent research and investment management company. Westpeak’s ActiveBeta portfolio construction methodology, used in the new High Efficiency Defensive Indexes, helps investors more efficiently capture targeted investment factors such as value, momentum and volatility. In this case the targeted factor is stability.
“Westpeak designs strategies that seek an information-efficient capture of common factor returns at targeted levels of tracking error and with reduced turnover,” says Kal Ghayur, managing partner and chief investment officer at Westpeak Global Advisors. “We are pleased to join forces with Russell Indexes to bring this index innovation to investors looking for additional ways to implement low-volatility investment strategies at desired levels of tracking error.”
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