Improved Beta? - IndexUniverse.com

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Editor’s Note Considering Alternatives Jim Wiandt Editor With beta becoming the new alpha, it seems apt that index weighting schemes are again coming into focus. Despite Rob Arnott and others pitching alternatively weighted indexes as effectively better beta, they’ve always struck me as an effort to try to squeeze some alpha in over the market cap … more akin to enhanced indexing than “better beta,” and certainly some bet against where the market holds its money. Now, to some extent, the numbers are in. Alternative weighting strategies have been on the market for a few years now, and they’ve been stress-tested in some very stressful environments. We thought it was time to take a good, hard look at how they’ve fared. That’s all the more important considering that many more alternative strategies are coming down the pike, including new equal-weighted ETFs providing exposure to all your favorite indexes. In this issue, you’ll get some insight into how these types of funds and indexes work. Right on point is a survey from Noël Amenc, Felix Goltz and Lionel Martellini firmly planting the flag that the alternatively weighted indexes outperform, in many respects, their capweighted counterparts. There is plenty of data in the piece for you to peruse and ponder. Pradeep Velvadapu weighs in with a piece looking at equal sector weighting … a strategy that has particularly fared well on the bust side of boom/bust bubbles like late ’90s tech and 2008 financials ... both extremely interesting case study time periods for alternatively weighted indexes. Compare, contrast, reflect. Next up is an old-school roundtable from some of the leading players on the alternative and cap side of the weighting equation, including the thoughts of Gus Sauter, Rob Arnott, Scott Ebner, Srikant Dash, Frank Nielsen and Chris Woods. The hardcore JoI fans out there will LOVE this Q&A. Rounding out the issue is a look at “core vs. blend” portfolios by the always engaging David Blanchett, a great piece on the challenge of benchmarking microfinance by Peter Wall, David Blitzer making the assertion that if you’re in the markets, you’re a sorter or a digger, and Lara Crigger with a back-page jolly that sort of pans … me. Happy investing! These are exciting times around here and in our industry. Jim Wiandt Editor 8 January / February 2011
Page 1 and 2: Improved Beta? Noël Amenc, Felix G
Page 3 and 4: Contributors Noël Amenc Noël Amen
Page 5 and 6: FREE SUBSCRIPTION OFFER! The Journa
Page 7: David Smith Publisher dsmith@fa-mag
Page 11 and 12: Improved Beta? A comparison of inde
Page 13 and 14: volatility and correlation (for min
Page 15 and 16: Figure 2 Risk/Reward Difference Com
Page 17 and 18: show marginal statistical significa
Page 19 and 20: Figure 5 Appendix: Risk/Reward Diff
Page 21 and 22: The Evolution Of Equal Weighting Ad
Page 23 and 24: Figure 3 1 0.8 0.6 0.4 0.2 0 Figure
Page 25 and 26: Russell’s sector equal-weighted i
Page 27 and 28: structures in the U.S. large- and s
Page 29 and 30: negative alpha is observed for both
Page 31 and 32: The Weight Debate A roundtable 30 J
Page 33 and 34: for perceived growth is constantly
Page 35 and 36: isks and active risks in active str
Page 37 and 38: Core Vs. Blend Index investing in t
Page 39 and 40: that given size range. In contrast,
Page 41 and 42: Benchmarking Microfinance Equity In
Page 43 and 44: Figure 1 Illustration: Determining
Page 45 and 46: Figure 3 Establishing MFI SVIX Annu
Page 47 and 48: Figure 5 WSAS MFI SVIX Series - Bas
Page 49 and 50: aggregation and resultant “smooth
Page 51 and 52: Talking Indexes Sorting And Digging
Page 53 and 54: News Indexes Regain Edge Over Activ
Page 55: News version of it, which excludes
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policies won’t change, Guggenheim
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Global Index Data Selected Major In
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Morningstar U.S. Style Overview Jan
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Exchange-Traded Funds Corner Larges
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INVESTING IN THE FUTURE OF THE U.S.
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RYDEX EQUAL WEIGHT ETFs Find out wh
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