A custom index is a tailor-made solution designed to suit clients’ unique mandates or investment strategies clients can either modify existing index or create an entirely new index based on specific requirements. ETF sponsors, derivative desks, self-indexers, structured product teams, exchanges and plan sponsors all use custom indices as the basis for new financial products and benchmarks.
Custom indices are available across a variety of asset classes, including but not limited to equities, commodities and fixed income.
It is possible to calculate history for a custom index if the necessary data is available for the desired historical time frame.
An index can be calculated every 15 seconds-24 hours a day, seven days a week or using a pre-determined frequency.
Smart Beta Indices
Smart beta’s main objective is to obtain alpha, lower risk or increases diversification at a cost lower than straight index investing. Smart beta indices are combination of the efficient market hypothesis and value investing. The approach applies to popular asset classes, such as equities, fixed income, commodities, and multi-asset classes.
It emphasizes capturing investment factors or market inefficiencies in a rule based transparent way. Alternative weighting schemes may be used such as volatility, liquidity, quality, value, size and momentum.
Thematic Investment
Thematic investing is an investment approach with a focus on broader macroeconomic themes that a fund manager can use to identify strong companies.
In Thematic investment, the manager picks things they think are important.
One of the benefits includes the strategic context, getting behind future tailwinds, narrowing the universe and focusing further research while avoiding spot forecasting or market timing.
The opportunity comes when more people believe in same the same themes and investment is driven in the direction of these companies. The shift of capital can drive superior performance in a thematic portfolio if the companies in the indexes benefit from the business.
Its advocates say it is an effective strategy because it concentrates securities in an idea that is still misunderstood and unappreciated in the market place.
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