S&P Targets Volatility In Beaten-Down Indexes

Standard & Poor’s is zeroing in on volatility levels in four indexes within its Emerging Market and Global Thematic Index Series, indexes that have turned in terrible performance amidst the market crisis.

The volatility-targeting approach has been common in the structured products arena, but is new to the indexing world. The risk-control indexes work by setting a specific volatility target based on the historical volatility of an underlying index, and monitoring that level to make sure it remains constant.

If the risk level moves above the established target, the cash level is increased in order to maintain the target volatility. If the risk level moves below the threshold, the index will employ leverage to maintain the target volatility.

The risk-control index overlay will be applied to the S&P BRIC 40 Index (18 percent risk), S&P Latin America 40 Index (18 percent risk), S&P South East Asia 40 Index (18 percent risk) and S&P Global Infrastructure Index (12 percent risk).


HSBC Dives Into Water Index Market

HSBC has launched the HSBC Optimised Global Water Index, and plans to bring out a number of investment products pegged to it. The HSBC Optimised Global Water Index is a modified market-cap-weighted index comprising a maximum of 20 stocks. It exists in two versions: the Global Water Total Return Index, which includes ex-dividend adjustments; and the Global Water Price Return Index, which excludes the effects of dividends.

Index holdings must be available to foreign investors and have a minimum average daily traded value over three months of $1 million. Index companies must be engaged in water-related businesses including water collection, storage, purification, distribution, metering, desalination and sanitation. However, as companies whose business activities are simply closely linked to water usage are eligible for inclusion, the index is not considered a pure-play.

The new HSBC water index is in line with HSBC’s larger initiatives in the index sector, where the bank has been among the most active index providers in creating new benchmarks to track climate change and related global natural resource issues.

Water indexes have found recent favor among ETF providers, among the general uptick of index ETFs with global natural resource and energy market themes. A big part of these ETFs’ marketing has also been the rhetoric of the demographic challenges across the globe as the world population expands against a finite set of natural resources.


New MSCI Indexes Combine Emerging, Frontier Markets

MSCI recently launched its latest sally in the frontier indexing scramble with the rollout of the MSCI Frontier Emerging Markets Index and the MSCI Frontier Emerging Markets APEX Index.

MSCI’s newest products combine frontier markets with some of the less-developed emerging markets into a single index, under the premise that some countries that fit the criteria for emerging markets nonetheless behave more similarly to frontier markets.

The two new indexes include a broad benchmark and an investable, narrower index that is marketed under the APEX name, similar to a narrow index covering Asia launched in 2008. The broad index covers 27 countries, including eight emerging markets: Argentina, Colombia, Egypt, Jordan, Morocco, Pakistan, Peru and the Philippines. Meanwhile, the APEX index includes 23 markets, excluding Mauritius, Sri Lanka, Ukraine and Vietnam for the purposes of investability.


BNY Rolls Out GDR Indexes

The Bank of New York Mellon launched The Bank of New York Mellon GDR Index and 30 global depository receipt (GDR) subindexes in October.

The GDR Index covers all the global depository receipts traded on the London Stock Exchange. The subindexes cover broad-market, regional and country GDR exposure, with country benchmarks the largest group, numbering 23 subindexes.

The original BNY Mellon ADR Index was created 10 years ago, and features 56 subindexes.

BNY Mellon has also melded the new GDR index with its existing ADR index to create a depository receipt index covering all issues on the major U.S. exchanges and the LSE.

Subindexes have also been created based on the hybrid DR index—one broad market, four regional and eight country subindexes. Existing DR indexes from BNY Mellon include the Russia Select DR Index, the Frontier Select DR Index and the New Frontier DR Index.

The GDR Index, DR Index and their subindexes are cap-weighted and adjusted for free float.


Dow Jones Creates Southeast-Asia-Focused Islamic Index

Dow Jones Indexes launched the Dow Jones Islamic Market ASEAN Index, the first index to cover Shari’ah-compliant companies in six of the 10 member states of the Association of Southeast Asian Nations (ASEAN): Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

The DJIM ASEAN Index will serve as the basis for ETFs and other investment products. Islamic nations in the Middle East and in Southeast Asia are ramping up efforts to develop their local ETF marketplaces.

The only licensee so far for the DJIM ASEAN is a traditional equity fund manager, Malaysia-based Corston-Smith Asset Management.

The DJIM ASEAN Index is weighted by free-float market capitalization and includes 284 components.