STOXX Limited announced that two STOXX Minimum Variance indices have been licensed to Resona Bank to be used in passive funds that will be used by Japanese pension funds. The STOXX Minimum Variance….
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Indices use Harry M. Markowitz’s Nobel Prize winning Modern Portfolio Theory to create a hypothetical, risk-optimized portfolio, which is based on a variety of STOXX indices.
Resona Bank’s recently introduced funds use the STOXX Global 1800 Minimum Variance Unconstrained and STOXX Global 1800 ex Japan Minimum Variance Unconstrained indices as benchmarks.
“The STOXX Minimum Variance Indices are available in a constrained and an unconstrained index version. The latter is a novelty as it provides a strategy index that is minimized for volatility, but not restricted to follow an underlying base index too closely,” said Hartmut Graf, chief executive officer, STOXX Limited. “By licensing these indices to Resona Bank, Japanese pension funds will be able to participate from these innovative low volatility investment strategies.”
The basis for each of the STOXX Minimum Variance Indices is one of STOXX’s broad regional or country indices. The objective of the indices is to provide access to the respective markets by varying the weights of the stocks of the underlying broad indices in such a way that the overall portfolio of the minimum variance index has the lowest possible volatility. In order to achieve robust results, a covariance matrix that is estimated using a fundamental factor model developed by Axioma, a leading provider of portfolio constructions tools and risk models, is used. For each index, a constrained as well as an unconstrained version is available. The constrained index version is based on a composition that is very similar to the underlying index, but possesses a lower risk profile. This index version enables market participants to closely follow a certain benchmark index and still benefit from a risk optimized portfolio. The unconstrained index version might differ more strongly from the underlying index, while offering the potential benefit of an even better risk profile.
The constrained versions of the STOXX Minimum Variance Indices are rebalanced quarterly in line with the respective underlying index. The unconstrained versions are rebalanced on a monthly basis. The STOXX Minimum Variance Indices are calculated in price, net and gross return versions and are available in euro, US dollar, as well as regional currencies for some of the regional indices. Price return versions are calculated in real-time, while net and gross return versions are available at the end of day.
Source: ETFWorld.com
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