FTSE Group and quant equity manager QS Investors, on Tuesday launched the FTSE Diversification Based Investing index series, seeking better diversification across geographies and industries than cap-weighted indexes offer in the face of the rise and collapse of market bubbles.
In an interview, James Norman, QS Investors president, said his team originally developed the approach in 2001 while at Deutsche Asset Management for a large global pension plan client seeking a better way to deal with momentum-propelled bubbles, such as Japanese stocks in the 1980s and tech stocks in the late 1990s. He said QS Investors' rules-based formula, by dynamically adjusting exposures to industries or geographic segments that are behaving differently from the broader market, allows clients to add value in both rising and falling markets.
Jerry Moskowitz, director of business development, FTSE Americas, said by identifying industries and areas performing differently from the broader market and adjusting exposures to those areas, the DBI indexes can offer better returns with less risk while maintaining the same basic holdings as market-cap indexes.
The series' initial offerings are the FTSE DBI Developed, FTSE DBI Developed ex-US and FTSE DBI Developed ex-Japan indexes.