FTSE Russell launches asset allocation indices

Feb 19th, 2019 | By | Category: Alternatives / Multi-Asset

FTSE Russell has unveiled the FTSE Market Based Allocation Index Series, a new suite of multi-asset indices that track the performance of globally diversified portfolios.

FTSE Russell launches asset allocation indices

The indices reflect the average asset allocation levels of real-world multi-asset funds as reported in Morningstar’s fund database.

The series comprises five indices, each targeting a different level of investor risk tolerance – from conservative to aggressive.

Each index covers a range of asset classes including equities (US, developed market, and emerging market), US government bonds, US collateralized bonds, US corporate bonds, global ex-US corporate bonds, and cash.

The exposure to each non-cash asset class is obtained through the relevant FTSE Russell index – for example, US equity exposure is reflected by the performance of the Russell 3000 Index. The Federal Funds Rate is used to represent exposure to cash.

The asset allocation mix for each index reflects the average asset allocation levels of real-world multi-asset funds as reported in Morningstar’s fund database.

For example, The FTSE US Market Based Allocation Conservative Index represents the average asset allocation for multi-asset portfolios within the lowest level (fifth quintile) of historical volatility according to Morningstar’s database.

Similarly, the Moderately Conservative, Moderate, Moderately Aggressive, and Aggressive indices represent portfolios within the fourth, third, second, and first quintiles of historical volatility, respectively.

The asset allocation levels for the indices are reviewed semi-annually in March and September.

Susan Quintin, Managing Director, Global Product Management, FTSE Russell, said, “We’re excited to be able to draw on our extensive index capabilities across equity and fixed income to offer a unique tool to meet a clear need for our clients.

”The new index series bridges a gap in the investment community and will establish a new industry standard for defining risk tolerance levels and benchmarking asset allocation investment strategies.”

ETFs linked to asset allocation indices are designed to serve as one-ticket portfolio solutions. This month has seen asset allocation ETFs launched in Canada by BMO Asset Management, which introduced three such funds, and Vanguard, which unveiled two. Both sets of funds are linked to asset allocation models designed in-house by the firms’ own investment management teams.

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