FTSE Group and QS Investors LLC, an independent investment firm, have launched the FTSE Diversification Based Investing (DBI) Index Series, the index provider announced Tuesday.
The new indexes are alternatively weighted to promote diversification across countries and industry sectors, the statement said. They seek higher absolute and risk-adjusted returns compared with market cap-weighted indexes, and with less downside risk. At present, the series comprises three indexes: FTSE DBI Developed Index, FTSE DBI Developed ex US Index and FTSE DBI Developed ex Japan Index.
According to the statement, the investment philosophy underlying the FTSE DBI Index Series is that both geography and industry are the primary drivers of global equity risk and return; and that market sentiment can lead to momentum effects, causing concentration risk in market-cap-weighted indexes. A diversified portfolio helps to avoid this concentration risk and lessens downside risk. Using a transparent, rules-based formula, the indexes diversify exposure by reweighting countries and industries to avoid concentration risk and momentum effects.
Risk assessment will occur annually and index rebalancing will occur quarterly, the statement said.
The indexes are derived from the FTSE All-World Index Series, which is market cap weighted and made up of large and midcap companies across all regions globally. Over the past five years, FTSE DBI Developed Indexes have consistently outperformed their All-World equivalents, according to the statement.
FTSE, an independent company jointly owned by The Financial Times and the London Stock Exchange Group, calculates and manages equity, fixed income, real estate and investment strategy indexes on both a standard and custom basis, the statement said. FTSE has offices on four continents and works with investors in 77 countries.
New York-based QS Investors provides asset management and advisory services to institutional clients. According to the statement, the firm is one of the largest majority woman owned asset management firms, with some $11 billion under management and $70 billion under advisement.