Nasdaq OMX and DWS Investments Roll Out Volatility Target Index

New benchmark is designed to manage investment risk

The Nasdaq OMX Group Inc. and DWS Investments, the U.S. retail unit of Deutsche Bank's global asset management division, have launched a new benchmark designed to provide exposure to the Nasdaq-100 Index in a risk-controlled manner, the firms announced Thursday, August 26.

According to a statement, the DWS Nasdaq-100 Volatility Target Index (VOLNDX) provides variable exposure to the Nasdaq-100 Index, using a volatility control mechanism designed to limit risk by dynamically adjusting exposure between the Nasdaq-100 and a cash investment. As the volatility of the Nasdaq-100 increases, VOLNDX decreases exposure to the index. As volatility decreases, exposure to the Nasdaq-100 increases, potentially becoming leveraged.

"Recent market events combined with changing demographics have altered the investment landscape," Chris Warren, managing director and head of structured products in the Americas at DWS Investments, said in the statement. "Consequently, investment objectives are more complex than just going long the market--investing in a risk-controlled manner is critical given an increased focus upon wealth preservation."

The Nasdaq-100 Index comprises the 100 largest domestic and international non-financial securities reflecting companies across major industry groups, including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology listed on the Nasdaq.

The Nasdaq OMX Group, Inc. delivers trading, exchange technology and public company services across six continents, with approximately 3,600 listed companies. DWS Investments manages some $133 billion (as of the first quarter of 2010) in retail and retirement assets in more than 150 mutual funds and variable insurance portfolios across all major asset categories in the U.S.

Michael S. Fischer (msf7@columbia.edu) is a New York-based financial writer and editor and a frequent contributor to WealthManagerWeb.com.

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