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Lipper uses ETFs as components of optimal target risk benchmarks

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Lipper, the mutual fund research subsidiary of Reuters, has created the Lipper Optimal Target Risk Indices, a suite of target risk fund benchmarks comprised of exchange-traded funds whose

Lipper, the mutual fund research subsidiary of Reuters, has created the Lipper Optimal Target Risk Indices, a suite of target risk fund benchmarks comprised of exchange-traded funds whose historical returns, correlations, liquidity and expenses are analysed to identify the appropriate mix of five levels of progressively increasing risk and return benchmarks.

Lipper Optimal Target Risk Indices are made up of five individual indices with risk profiles ranging from aggressive growth to very conservative: Lipper Optimal Aggressive Growth Index, Lipper Optimal Growth Index, Lipper Optimal Moderate Index, Lipper Optimal Conservative Index and Lipper Optimal Very Conservative Index.

The suite of indices takes a new approach to optimisation by isolating the universe of investible assets to include only ETFs that meet predetermined criteria. The optimisation routine then runs on a financial model unconstrained by specific asset type weight parameters, resulting in a mix of assets with a stable risk profile.

‘It is essential that advisors not only keep on top of the proliferation of new products regularly introduced to the marketplace, but also align clients’ asset risk profile with their liabilities,’ says Andrew Clark, Lipper’s head of research for the Americas. ‘The Lipper Optimal Target Risk Indices will both name ETFs that fit specific risk profiles and serve as a benchmark for clients at various stages of the retirement horizon.’

Lipper recently announced the launch of Lipper Retirement Insight, an investment selection and monitoring tool designed to enable financial advisors, consultants and retirement product providers the means to offer unbiased recommendations to retirement plan fiduciaries.

The firm provides independent information on global collective investments including mutual funds, retirement funds, hedge funds, fund fees and expenses to the asset management and media communities, covering 150,000 share classes and more than 80,000 funds in 56 domiciles.

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