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Figure 1 Annual Tracking Error In Two Down Years And Two Up Years Down Years Up Years S&P 500 Annual Performance Fund Type Symbol 2002 -21.98 2008 -36.55 1 Formerly Vanguard Total Market VIPERS. 2 Formerly Nasdaq-100 Index Tracking Stock. 3 Formerly Vanguard Extended Market VIPERS. 4 Formerly iShares Goldman Sachs Technology Index Fund. 5 Formerly iShares DJ US Consumer Cyclical. All calculations are Fund Return minus Index Return, so the tracking error includes the expense ratio. Sources: Morgan Stanley, Barclays Global Investors, State Street Global Investors, Thomson, Bloomberg 2003 28.25 S&P Depositary Receipts (SPDR) SPY 1 12 -30 -14 iShares Russell 1000 IWB -7 3 -25 -17 Vanguard Total Market 1 VTI -10 7 -21 -5 iShares Russell 3000 IWV -9 1 -29 -20 iShares DJ US Total Market IYY -9 -10 -33 -25 PowerShares QQQ 2 QQQQ -12 -10 -34 -26 Diamonds Trust DIA -11 -1 -30 -23 S&P MidCap 400 SPDR MDY -5 -43 -46 -30 iShares S&P MidCap 400 IJH -21 3 -25 -18 iShares S&P MidCap 400 Growth IJK -24 -1 -19 -6 iShares Russell MidCap IWR 2 4 -33 -22 iShares Russell 2000 IWM -4 13 -31 -19 iShares S&P SmallCap 600 Growth IJT -19 6 -26 -24 iShares S&P SmallCap 600 IJR -11 -2 -20 -18 Vanguard Extended Market ETF 3 VXF -24 34 -29 18 iShares S&P 500 Growth IVW -9 -3 -24 -20 iShares Russell 1000 Growth IWF -11 -3 -29 -20 iShares Russell 2000 Growth IWO -3 11 -35 -22 iShares S&P 500 Value IVE -13 -2 -28 -21 iShares Russell 1000 Value IWD -16 2 -32 -24 iShares Russell 2000 Value IWN -9 18 -41 -29 Technology Sector SPDR XLK -15 40 -46 -22 iShares S&P North American Techology 4 IGM -31 -18 -61 -53 Financial Sector SPDR XLF -19 6 -53 -39 iShares DJ US Financial Sector IYF -46 -6 -86 -62 Consumer Discretionary Sector SPDR XLY -21 6 -44 -19 iShares DJ US Consumer Goods 5 IYK -58 -21 -73 -59 Energy Sector SPDR XLE -19 -9 -49 -28 Industrial Sector SPDR XLI -22 1 -59 -30 Column Totals -455 38 -1091 -697 Average per fund (rounded) -15 1 -36 -23 2006 15.49 same entity. With respect to 40 percent of its investments, the UCITS can invest no more than 5 percent of its assets in the instruments of a single issuer. Interestingly, there is a more flexible UCITS provision for index funds. An indexreplicating UCITS fund may invest up to 20 percent of its net assets in shares and/or debt securities issued by the same entity. The 20 percent limit can be raised to 35 percent under “exceptional market conditions.” To qualify for these larger positions, the benchmark index must use a recognized methodology that generally does not result in the exclusion of a major issuer in the market the index represents. Benchmark replication inside an ETF does not appear to be a significant diversification issue in the EU countries where UCITS prevails or elsewhere outside the U.S. However, a number of U.S. ETFs are based on non-RIC-compliant indexes. A few single-country ETFs and some sector funds issued by Barclays Global Investors based on Dow Jones sector indexes and by Vanguard based on MSCI sector indexes are not based on RIC-compliant indexes. The S&P sector indexes used for the Select Sector SPDRs are specially weighted to be RIC compliant. Most indexes introduced as ETF benchmarks have been RIC and/or UCITS compliant. 2 All or nearly all index publishers are willing to provide RIC- and UCITS-compliant versions of any of their indexes. The use of noncompliant 48 January/February 2010
Welcome to the leading provider of European equity indices. How do you become one of the top addresses for sophisticated index solutions that open the door to Europe? Whether it’s European Blue-chip, benchmark or sector exposure that you are looking for, STOXX offers the right indices for access to multiple markets and styles. That’s what makes us the No. 1 index provider globally for European focused Exchange Traded Funds, Futures and Options and structured products. www.stoxx.com STOXX LIMITED A Joint Venture of Deutsche Börse AG, Dow Jones & Company and SIX Swiss Exchange AG Dow Jones STOXX indices are the intellectual property of STOXX Ltd. (“STOXX”) and/or its owners, including Dow Jones & Company Inc. (“Dow Jones”). “Dow Jones” is a trademark of Dow Jones and “STOXX” is a registered trademark of STOXX. Use of the trademarks and indices requires a licence. Neither STOXX nor Dow Jones endorses, issues, markets, recommends or promotes financial products based on the Dow Jones STOXX indices. STOXX and Dow Jones accept no liability with respect to such financial products.
Page 1 and 2: Documenting The Collapse Of The Cor
Page 3 and 4: Contributors Rob Arnott Rob Arnott
Page 5 and 6: FREE subscRiption oFFER! The Journa
Page 7 and 8: David Smith Publisher dsmith@fa-mag
Page 9 and 10: Editor’s Note Was 2008 A Last Gas
Page 11 and 12: Record-High Correlations Pose Chall
Page 13 and 14: Figure 4 Correlations Of Weekly Ret
Page 15 and 16: Diversification And Risk Management
Page 17 and 18: Thoroughbreds perform better with b
Page 19 and 20: For over 40 years, our industry has
Page 21 and 22: One-Stop Shopping for Global Commod
Page 23 and 24: economic footprint (a Fundamental I
Page 25 and 26: Figure 3 Portfolio/Index Ending Val
Page 27 and 28: investing strategies. Drawdown char
Page 30 and 31: Figure 9 Estimated Transaction Cost
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Page 35 and 36: “extra” return here or there. T
Page 37 and 38: The events of 2008 and early 2009 s
Page 39 and 40: Clearly the biggest asset that any
Page 41 and 42: think no one—neither an individua
Page 43 and 44: Actively Passive? When a little act
Page 45 and 46: Figure 1 Passive-Passive: Buy-And-H
Page 47 and 48: Figure 2 Active-Passive: Active Por
Page 49 and 50: Apparent Value Added By Fund Manage
Page 51: In Part One of this article, I deve
Page 55 and 56: INSIDE ETFs EUROPE CONFERENCE Lead
Page 57 and 58: for this kind of analysis. Investor
Page 59 and 60: Apparent Value Added By Fund Manage
Page 61 and 62: strategy), tracking the performance
Page 63 and 64: BarCap Debuts Emerging Asia Swap In
Page 65 and 66: ALPS Debuts Jefferies Funds ALPS is
Page 67 and 68: Global Index Data Selected Major In
Page 69 and 70: Morningstar U.S. Style Overview Jan
Page 71 and 72: Exchange-Traded Funds Corner Larges
Page 74 and 75: VGSH VGIT VANGUARD SHORT-TERM GOVER

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