SOURCE: Russell Investments

Russell Investments

August 28, 2015 12:00 ET

An Alternative Lens on Global Market Volatility: FTSE Minimum Variance Index Series Exhibits Reduced Volatility Across US, European & Asian Equities During Recent Global Equity Market Decline

SEATTLE, WA--(Marketwired - Aug 28, 2015) - Amid heightened equity market volatility and declines across the US, Europe and Asia in the last week, the FTSE Minimum Variance Index Series has had lower index volatility relative to the market capitalization weighted benchmark.

For the week ended August 25, the FTSE USA Minimum Variance Index, FTSE Developed Europe Minimum Variance Index and FTSE Developed Asia Pacific Minimum Variance Index were all down sharply. However they lost less ground than their market capitalization weighted parent indexes FTSE USA, FTSE Developed Europe and FTSE Developed Asia Indexes, respectively. A similar performance trend has occurred for the last 3 months, 6 months and year-to-date time periods as of August 25.

Sector weighting for the FTSE Minimum Variance indexes contributed to this performance difference relative to the market capitalization weighted indexes. For example, as of August 25 the FTSE Developed Asia and FTSE Developed Europe Minimum Variance indexes were both underweight financials (-14% and -7% respectively) while overweight Consumer Services (+10% and +7% respectively) relative to their market cap counterpart. And the FTSE USA Minimum Variance Index was underweight Technology (-7%) and overweight Utilities (+9%) relative to its market cap weighted equivalent index. 

Tom Goodwin, senior research director with FTSE Russell, said:
"The FTSE Minimum Variance Index Series seeks to reduce volatility while maintaining a balanced exposure to the broad market. And, in periods of heightened volatility and equity market declines, they can provide market participants an alternative to pure market capitalization weighted indexes which are driven purely by stock price. This distinction is illustrated in the market performance year-to-date."

FTSE Russell has recently completed a new research paper on low volatility and minimum variance indexes.

                     
FTSE Russell Index   August 18-25, 2015   3 Months as of August 25   6 Months as of August 25   2015 YTD as of August 25   One Year as of August 25
FTSE USA Minimum Variance Index   (-9.4%)   (-8.0%)   (-7.6%)   (-4.7%)   1.3%
FTSE USA Index   (-10.9%)   (-11.0%)   (-10.4%)   (-7.9%)   (-5.1%)
FTSE Developed Europe Minimum Variance Index   (-3.7%)   (-4.4%)   (-2.9%)   2.8%   (-4.3%)
FTSE Developed Europe Index   (-5.1%)   (-7.0%)   (-5.8%)   0.2%   (-7.6%)
FTSE Developed Asia Pacific Minimum Variance Index   (-8.0%)   (-11.2%)   (-7.1%)   (-0.6%)   (-7.6%)
FTSE Developed Asia Pacific Index   (-9.2%)   (-14.3%)   (-10.7%)   (-4.7%)   (-11.4%)
                     

Source: FTSE Russell Indexes. Total returns, US dollar denominated. Past performance is no guarantee of future results.

About FTSE Russell:
FTSE Russell is a leading global provider of benchmarking, analytics and data solutions for investors, giving them a precise view of the market relevant to their investment process. A comprehensive range of reliable and accurate indexes provides investors worldwide with the tools they require to measure and benchmark markets across asset classes, styles or strategies. 

FTSE Russell index expertise and products are used extensively by institutional and retail investors globally. For over 30 years, leading asset owners, asset managers, ETF providers and investment banks have chosen FTSE Russell indexes to benchmark their investment performance and create ETFs, structured products and index-based derivatives.

FTSE Russell is focused on applying the highest industry standards in index design and governance, employing transparent rules-based methodology informed by independent committees of leading market participants. FTSE Russell fully embraces the IOSCO Principles and its Statement of Compliance has received independent assurance. Index innovation is driven by client needs and customer partnerships, allowing FTSE Russell to continually enhance the breadth, depth and reach of its offering.

FTSE Russell is wholly owned by London Stock Exchange Group.

For more information, visit www.ftserussell.com

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London Stock Exchange Group companies includes FTSE International Limited ("FTSE"), Frank Russell Company ("Russell"), MTS Next Limited ("MTS"), and FTSE TMX Global Debt Capital Markets Inc ("FTSE TMX"). All rights reserved.

Views expressed by Tom Goodwin are as of August 25, 2015 and subject to change. In addition, views expressed by Russell Rhoads do not necessarily reflect the views of FTSE Russell or the London Stock Exchange Group.

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