MSCI, a provider of investment decision support tools worldwide, has launched the MSCI Quality Mix Indices, which combine the MSCI Quality, MSCI Value Weighted and MSCI Minimum Volatility Indices into one diversified risk premia index.
Baer Pettit, managing director and global head of the MSCI Index Business, said: "We are delighted to bring to the market a set of new indices designed to reflect the beta represented by combining quality with value and low volatility strategies. The new MSCI Quality Mix Indices are another example of our ability to deliver innovative index tools to meet the increasingly sophisticated needs of our clients."
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Many active strategies emphasize quality, value and low volatility as important factors in their security selection and portfolio construction. Whilst these active strategies typically go beyond passive exposure to quality, value and low volatility securities to include active stock selection and the use of leverage, their beta component could be represented by the quality, value and low volatility risk premia.
Recent empirical academic research has shown that stocks with high quality, value and low volatility characteristics have historically provided higher long-term risk-adjusted return.
The MSCI Quality Mix Indices aim to represent the performance of quality, value and low volatility risk premia strategies across global markets in a single composite index.
Between 1988 and 2013, based on simulated historical index data, the MSCI World Quality Mix Index delivered an annualized total return of 9.8% versus 7.3% for the MSCI World Index, with a total risk of 13.2% versus 15.4% for the MSCI World Index, resulting in a better long-term risk-adjusted return for the MSCI World Quality Mix Index during this time period.
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By GlobalDataThe MSCI Quality Mix Indices are constructed according to a transparent index methodology which equally weights the three component indices: the MSCI Quality Index, the MSCI Value Weighted Index and the MSCI Minimum Volatility Index. They may be licensed for use as benchmarks or as the basis for financial products such as exchange traded funds and structured products.
