FTSE Group (“FTSE”), the award winning global index provider, and global asset management firm Westpeak Global Advisors (“Westpeak”) have today launched the FTSE ActiveBeta Index Series, which provides an efficient, transparent and cost-effective vehicle for capturing systematic sources of active equity returns. The new series draws on the FTSE All-World Index Series, the benchmark of choice for international investors, for its base universe.
The FTSE ActiveBeta Index Series provides a new approach to investing in equities, derived from the premise that a significant portion of traditional active equity management returns – or alpha – is attributable to systematic sources of active returns rather than a manager’s stock selection skill. The new index series is based on research establishing that momentum and value, two widely used approaches in active management, are, in fact, systematic sources of active returns and should therefore be viewed as additional forms of betas – or ‘Active Betas’. The research also provides evidence of the counter-cyclical nature of momentum and value active returns, which implies that the combined capture of momentum and value should provide superior risk-adjusted performance compared to the capture of either momentum or value alone.
The index series can be used by a variety of institutional investors and product issuers to:
- structure more efficient equity portfolios through direct allocation to the systematic sources of active equity returns
- benchmark active growth, value and core managers’ investment performance more appropriately by using indices that better reflect their investment process
- create low cost passive investment vehicles which provide an alternative to traditional active management strategies
Westpeak’s Chief Executive Officer and Chief Investment Officer, Khalid Ghayur, commented, “For the first time, investors have access to an internally consistent global family of momentum, value, and combined momentum and value indices, which more accurately reflect the investment processes of active managers and provide a better understanding of the nature of traditional active equity returns.”
Mark Makepeace, Chief Executive, FTSE Group, added, “FTSE is proud to introduce this new range of equity style indices by partnering with Westpeak Global Advisors. The new FTSE ActiveBeta Index Series offers investors a fresh perspective on style investing as well as an alternative to traditional active management strategies, and further extends the range of tools FTSE provides to help clients meet their investment objectives.”