MSCI Inc. (NYSE: MXB), a leading provider of investment decision support tools worldwide, announced today the launch of a unique range of long/short factor indices based on MSCI indices and Barra risk models. The new indices are designed to reflect the returns of a single Barra risk factor and a designated market in a replicable manner. They target the Barra Momentum, Value, Volatility, Earnings Yield and Leverage risk factors.
“By combining MSCI’s considerable index construction and risk modeling expertise, we have been able to develop unique indices that aim to reflect high factor returns within the European and US equity markets,” said David Brierwood, Chief Operating Officer at MSCI Inc. “Factors such as Volatility and Leverage can play a significant role in determining portfolio risk and performance, and the availability of these long/short factor indices provides institutional investors with a valuable analytical tool for factor-based hedging and investment strategies.”
Designed for use by institutional investors in US and European equities, the eight new factor indices are:
• MSCI Europe Barra Momentum Index • MSCI USA Barra Momentum Index
• MSCI Europe Barra Low Leverage Index • MSCI USA Barra Low Leverage Index
• MSCI Europe Barra Low Volatility Index • MSCI USA Barra Low Volatility Index
• MSCI Europe Barra Value Index • MSCI USA Barra Earnings Yield Index
The new indices use an optimization process that, based on specified constraints, aims to achieve a specified high level of exposure to a single Barra factor, very low exposure to other factors and low tracking error to the corresponding MSCI index.
“We have already seen considerable interest from our clients in using the MSCI Factor Indices to support innovative portfolio analysis and portfolio configuration, as well as to enable the creation and monitoring of more tradable products in this area,” said Theodore Niggli, Managing Director and Head of MSCI Indices.