The new FTSE Target Exposure Indexes are a suite of benchmarks designed to focus on specific characteristics— such as factor, climate and ESG exposures—while minimizing all off-target, consequential exposures, to deliver a “near pure” index. Target exposures are completely flexible and can be combined to cater to specific client objectives and investment outcomes.
Factor precision, factor purity
The new FTSE Target Exposure Factor Indexes are the next evolution in FTSE Russell’s factor framework. The range extends the same established “tilt” methodology but provides the ability to achieve a variety of explicit exposure objectives. The result is a range of efficient single and multi-factor indexes designed to deliver specific levels of factor exposure. Additional targets may be incorporated to achieve specific active country, industry or beta exposure objectives including neutrality.
This alignment with investment objectives provides greater transparency and ensures exposure to rewarded and unrewarded risks is precisely controlled, resulting in a range of investment solutions spanning pure factor indices, tracking error objectives, factor allocation schemes and absolute return products.
This framework is readily extended to incorporate other objectives, including Carbon Emission and Fossil Fuels Reserves reduction targets in addition to a broader set of Sustainable Investment (SI) considerations.
Interview with Andy Dougan, director, Research and Analytics
Target Exposure: Methodology explained