On May 26, 2015, FTSE Russell introduced the FTSE Global China A Inclusion Indexes as a transitional tool in preparation for the potential inclusion of China A-shares in its widely followed global benchmarks. These indexes were designed in response to the gradual liberalization of the Chinese capital markets, as evidenced by the growth of the QFII and RQFII schemes and the introduction of the Shanghai-Hong Kong Stock Connect program.
It wasn’t too long ago that the concept of factors in investing was the exclusive province of professors of finance and a few active “quant” managers. Mainstream portfolio construction was focused primarily on asset allocation. Within equities, that meant achieving the right balance in allocation to various segments such as large cap and small cap, country and sector, and perhaps value and growth style.
Traditional style indexes – such as growth and value, large and small cap – are designed to represent broad market segments based on investment styles and sets of characteristics that are focused on by professional investment managers, making them excellent benchmarks for evaluating the skill of active managers.
In 1995, Nomura Research Institute and Frank Russell Company’s index group partnered to create the Russell/Nomura Japan Equity Indexes (RNJEI) as benchmarks for the Japanese equity market. The year 2015 marks the 20th anniversary of the creation of the RNJEI series and provides a good opportunity to evaluate the effectiveness of the indexes.
The RNJEI series was created to accomplish several objectives:1
The earth is flat . . . or so it was believed, until sometime after 500 B.C.1 Until then, explorers dared not venture too far, for fear of reaching the physical limits of the planet and . . . falling off. It’s easy to imagine how constrained the world must have seemed to those who held this view. Equity indexing, too, has had its own “flat earth” period, when the global opportunity set seemed to be limited to the largest stocks from a select number of large countries.
In finance and investment theory, factors are variables that drive equity returns. In recent decades there has been great interest in identifying factors that help explain equities’ behavior, and factor research has been actively pursued across other asset classes, such as fixed income and currencies.
Recent volatility in the value of the euro, Swiss franc and Japanese yen suggest that risk in global currency markets may be on the rise. The currency market is the world’s largest financial market and, with the ongoing globalization of portfolio exposures, is becoming an increasingly important component of investors’ returns. However, if investors share their currency exposures with those implicit in their equity, fixed income or other benchmarks, they may be setting their currency policy unconsciously, rather than consciously.
An equity factor index is intended to offer controlled exposure to a factor or factors. But how does it achieve this goal in practice? There are a number of conceptual and design steps involved in the creation of an equity factor index and in this paper we explore these decisions.
FTSE Russell, the global index provider, confirms today that Scottish Mortgage Investment Trust and Rentokil Initial will be joining the FTSE 100 Index. In the rebalance, Capita and Dixons Carphone will leave the UK’s leading index and enter the FTSE 250 Index.
FTSE Russell has today announced the results of the FTSE China Index Series quarterly review. Bank of Shanghai (A) and China United Network Communications (A) were added to the FTSE China A50 Index and, as a result, Daqin Railway (A) and Shanghai RAAS Blood Products (A) will be deleted from the FTSE China A50 Index. In the FTSE China 50 Index, Postal Savings Bank of China (H) and China Galaxy Securities (H) have been added in this review period. As a result Sinopharm Group (H) and Hengan Intl Group (H) will be deleted from the FTSE China 50 Index.
By: Catherine Yoshimoto, Senior Index Product Manager
Real estate investments can offer a relatively predictable income stream derived from rents that are also frequently inflation-linked, which can translate to long-term real returns. For real estate investors setting their sights solely on real estate investment trusts (REITs) in the Asia ex Japan region, a single security can comprise a significant portion of a traditional market cap weighted index. The FTSE EPRA/NAREIT Asia ex Japan REITs 10% Capped Index addresses this issue in its methodology, resulting in a more balanced, diversified index.
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