FTSE Group, the global index provider, and QS Investors, LLC, an independent investment firm providing asset management and advisory services to institutional clients, jointly announce the launch of the FTSE Diversification Based Investing (DBI) Index Series. The indexes are alternatively weighted to promote diversification across countries and industry sectors. They seek higher absolute and risk-adjusted returns compared to market cap-weighted indexes with less downside risk. The FTSE DBI Index Series is currently made up of three indexes, including the:
FTSE DBI Developed IndexFTSE DBI Developed ex US IndexFTSE DBI Developed ex Japan Index
The investment philosophy behind the FTSE DBI Index Series is that both geography and industry are the primary drivers of global equity risk and return; and that market sentiment can lead to momentum effects, causing concentration risk in market-cap weighted indexes. A diversified portfolio helps to avoid this concentration risk and lessens downside risk. Using a transparent, rules-based formula, the indexes diversify exposure by re-weighting countries and industries to avoid concentration risk and momentum effects. Risk assessment will occur annually and index rebalancing will occur quarterly.
The indexes are derived from the FTSE All-World Index Series, which is market-cap weighted and made up of large and mid-cap companies across all regions globally. Over the past 5-years, FTSE DBI Developed Indexes have consistently outperformed their All-World equivalents, as demonstrated by the graph below.
"DBI seeks to address macro and behavioural inefficiencies in global and international equity markets by developing a diversified exposure to macro risk factors. This differentiated approach is a compliment to both traditional and other alternatively weighted indexes." said James Norman, President, QS Investors, LLC.
"We are pleased to partner with QS Investors to create the FTSE DBI Index Series," said Mark Makepeace, CEO, FTSE Group. "They are a valuable addition to FTSE's growing family of investment strategy indexes."