Classification is a tricky business—and a critically important issue for investors. With returns of indexes purporting to track the same asset class frequently varying by hundreds of basis points in a single year, how an index decides what comprises a particular asset class is a critical question.
In this issue, we have all of the bases thoroughly covered in terms of how classification works in the various major asset classes. Leading things off is John Prestbo, who deals head-on with the questioning of the very legitimacy of midcap as an asset class. In addressing that question, he’s really put together a sweeping tour de force review of how size classification is handled generally by different providers. Next up is a strong piece by Brian Upbin and Nicholas Gendron of Barclays Capital, offering a detailed map of the vastness that is the fixed-income space.
Handling the question of international country classification as developed, emerging or frontier, we’ve decided to go with the committee approach, with thoughts from index providers and investors including the likes of MSCI’s Sebastien Lieblich, S&P’s Alka Banerjee, Steven Schoenfeld of Global Index Strategies, Matthew McCall of Penn Financial Group and Roger Nusbaum of Your Source Financial, among others. David Blitzer follows the “virtual roundtable” with a column on what can happen when a country’s development status changes. Then MSCI’s Raman Aylur Subramanian and Marc Kilbert take a look at the evolution of style indexes, which are some of the most all-over-the-map indexes there are.
Wrapping up the issue are our own Dave Nadig and Lara Crigger weighing in on some very specific sector-related issues, followed by staff writer Cory Banks’ cheeky “investigation” of some classifications that have thankfully never seen the light of day.
Jim Wiandt
Editor
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