News

INDEXING DEVELOPMENTS
By Journal of Indexes Staff

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Russell Launches Global SMID Index

Russell Investments recently rolled out a benchmark covering what the firm calls the global “SMID” segment.

The new index covers the middle chunk of the market and then a little more—from the upper ranks of the small-cap segment to the bottom echelons of the large-cap segment. The premise of the index seems to be that investment managers recognize that the largest companies don’t have a lot of significant growth ahead of them, while the very smallest companies often have significant risk factors, especially in emerging markets; SMID might be the happy medium.

The SMID index covers nearly 4,000 stocks ranging in size from $370 million to $5.3 billion, and can be broken down into multiple subindexes covering different styles or regions, such as emerging markets.

S&P 500 Buybacks Jump In 3Q

Standard & Poor’s said in December that third-quarter stock buybacks for the S&P 500 were up 44 percent from Q2, when they hit the lowest level ever recorded since S&P started keeping record in 1998.

Third-quarter buybacks reached $34.8 billion, up from $24.2 billion in Q2. By comparison, third-quarter totals remained more than 61 percent below the results seen in the third quarter of 2008, and nearly 80 percent lower than levels seen in the period two years ago.

Howard Silverblatt, senior index analyst at S&P Indices, noted in a press release that companies cautiously increased buybacks as the market recovery continued, while keeping an eye on expenditures. Silverblatt projected that stock buybacks could jump another 10 percent in the next quarter, but going into 2010, overall buybacks should remain well below peak 2007 levels, as these kinds of expenditures are “highly correlated to the recovering economy,” he said.

From a sector standpoint, financial sector buybacks jumped 80 percent in the third quarter from second-quarter levels, but remained more than 92 percent below 2007 levels. Similarly, information technology saw a boost of 121 percent in the quarter, snagging a 30 percent slice of all buybacks in the period.

By contrast, energy sector buybacks dropped 15 percent quarter-over-quarter.

DJI Adds New Index To Target Date Family

In January, Dow Jones Indexes updated its Dow Jones Target Date and Real Return index series with the addition of the Dow Jones U.S. Target Date 2050, Dow Jones Global Target Date 2050 and Dow Jones Real Return 2050 indexes. At the same time, DJI phased out the Dow Jones Target 2005, Dow Jones U.S. Target 2005 and Dow Jones Real Return 2005 indexes.

DJI’s target date indexes cover target years set at five-year intervals within a 40-year span, with indexes retired five years after they have reached their target date. The multi-asset indexes generally shift more weight into fixed income and cash, thereby reducing risk levels, as they move along their respective glide paths. The U.S. and Global index families track combinations of stocks, bonds and cash, while the global family includes an international component. Meanwhile, the Real Return series adds in TIPS, commodities and real estate securities.

S&P And BGCantor Announce Treasury Indexes

In December, S&P said it had entered into an agreement with market data provider BGCantor Market Data LP to collaborate with each other in the creation of a new family of U.S. Treasury indexes. BGCantor is a subsidiary of BGC Partners and specializes in fixed-income and derivatives data.

The indexes will be calculated by S&P based on data provided by BGCantor; S&P’s announcement said that the indexes would launch in the first quarter of 2010. According to S&P, the benchmarks were created with custom requirements, liability-driven investing and portfolio-building strategies in mind.

The initial launch will include 11 indexes: