FTSE Group, the award winning global index provider, and AlphaSimplex Group LLC, an investment adviser founded by MIT Professor Dr. Andrew W. Lo, jointly announce the launch of the FTSE StableRisk Index Series. The FTSE StableRisk Indices are a family of risk-controlled multi-asset indices which seek to capture long-term expected returns with less extreme shifts in short-term risk levels. The new index series is part of FTSEs growing family of innovative investment strategy indices which serve as tools to help address a range of sophisticated investment challenges.
The indices offer exposure to four asset classes: equities, commodities, currencies and interest rates. A separate index is calculated for each asset class and a composite index including all asset classes is also available.
At any given time, including periods of high market volatility, the indices are expected to exhibit relatively stable risk levels.
This is achieved by constructing a portfolio of liquid futures contracts to represent each asset class. This portfolio is then rebalanced, as often as daily, with the objective of maintaining the portfolios volatility at a given level. This level is typically the long-term average risk of that asset class.
In addition to the above indices, which hold long-only futures contracts, the FTSE Stable Risk Index Series also includes the FTSE StableRisk Trend Indices. These indices follow a simple momentum portfolio policy and hold both long and short futures contracts. Within these indices, assets with prices that appear to be trending upward are held long and those with prices that appear to be trending downward are sold short. The StableRisk Trend Indices are multi-asset, following the same structure as the FTSE StableRisk Indices, and seek to provide investors with long-term exposure to a rewarding risky asset without being fully exposed to heightened volatility associated with market downturns.
We are pleased to partner with AlphaSimplex to bring this innovative strategy to market, within a passive vehicle, said Mark Makepeace, CEO, FTSE. FTSE continues to be at the forefront of index innovation, and we are committed to meeting market demand and providing a range of sophisticated index solutions. Added Andrew W. Lo, Chairman of AlphaSimplex: The dynamic nature of market risk can lead investors to take much greater risk than they want or expect. We think that the new FTSE indexes eliminate the false choice between risk-control and index tracking error.
D.C.