Representatives of Dow Jones, MSCI, Russell and Standard & Poor’s and other industry players on Tuesday shared the roundtable at the second day of the Super Bowl of Indexing conference held in Phoenix. At the center of the debate was the proliferation of strategy indexes versus plain vanilla market indexes and their place in portfolio management.
“The largest holdings in the typical bond index are from companies or countries most deeply in debt,” said Robert Arnott, chairman and founder of Research Affiliates. “Who would ever want to have Ireland or Greece’s bonds as their largest positions?” One way to get around this, according to Arnott, could be by weighting bonds according to GDP and other blended financial factors rather than by the party that has issued the most debt. This strategy could help financial advisors to build bond exposure with lower volatility and higher quality debt investments.