S-Network Global Indexes has rolled out a new suite of indices, which includes equity benchmarks covering US, Europe, Pacific, Developed and Emerging Market regions, complete with sector sub-indexes. The proprietary and custom index provider for exchange-traded fund (ETF) and other financial products has over US$5bn in assets under management,
The US series also groups by market capitalisation, and growth versus value. The equity benchmarks include only operating companies with real estate investment trusts (Reits) and master limited partnerships represented in separate benchmarks under the alternative investment category. "First and foremost, we begin by screening every constituent of the benchmark indexes with minimum criteria," said Patrick Shaddow, director of index development at S-Network. "The new benchmarks use one consistent methodology across all regions. These screens include minimum average daily trading volumes, minimum float values and listing in recognised exchanges."
The new benchmarks provide an alternative to traditional benchmarks recognised in the US and abroad, according to Shaddow. "Wealth management companies with an objective to match or exceed the performance of a benchmark, such as the S&P 500 or the Russell 2000, can now use the S-Network Global Indexes as alternative standards," said Shaddow.
There is scope to use the indices as direct investments or wrapped in a product as an underlying, according to Shaddow. "They can also be used as the universe of eligible companies that can be deployed in new equity-linked products," said Shaddow.
For S-Network, the new indexes are an opportunity to capitalise on the upcoming fee compression that will likely follow the introduction of fiduciary rules by the Department of Labour (DoL).
The new indices can be used as the underlying for smart beta strategies because of the minimum criteria that the companies included in S-Network's benchmark series (average trading volumes, minimum float values, the type of exchange they trade on). "[The indices] are arranged in building blocks that provide exposure to different sectors (utilities, materials...) and can spring further beyond the beta-one performance of a given sector and be used as a smart beta strategy by applying filters such as momentum, dividend yield, low vol, value," said Shaddow.
The new benchmarks correlate well to comparable major benchmarks, while offering improvements at the global level, according to Shadow. "The new indexes carry high correlations and are beta-one indexes relative to their benchmarks (the S-Network 1000 Growth index has the same performance as the Russell 1000 Growth index, and so on)," said Shaddow.
The company has also launched an interactive index comparison tool to illustrate how its benchmarks correlate to comparable major benchmarks.
The S-Network Global Benchmarking System features daily constituent files and index values for price, total return and net total return variants in US dollars and euros from December 31, 1999.
Related stories:
Axa hot on demography as benchmarks become too expensive
Nikkei set to release new pan-Asian indices
Benchmarking concerns raised by the industry beyond the scope of the RTS mandate, Esma
US Department of Labor catches the eye with new fiduciary rules, SRP Americas