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Barron’s 400 Index to underlie Morgan Stanley structured note


Dow Jones Indexes has announced that the Barron’s 400 Index will serve as the basis of a structured note issued by Morgan Stanley, the first time the recently-launched index has been licen

Dow Jones Indexes has announced that the Barron’s 400 Index will serve as the basis of a structured note issued by Morgan Stanley, the first time the recently-launched index has been licensed to underlie an investment product.

Launched last month, the Barron’s 400 Index tracks the performance of the most promising companies as defined by fundamentals-related rules-based criteria. The index is a joint venture between Dow Jones Indexes and Barron’s, which are both part of the Dow Jones group.

‘The Barron’s 400 Index is a unique barometer of some of the most liquid and dynamic US companies,’ says Michael Petronella, president of Dow Jones Indexes. ‘We have already received a good deal of attention from the investment community and expect further interest in this innovative index offering.’

Kevin Woodruff, Morgan Stanley’s head of North America equity derivatives, says: ‘Providing access to the likes of Barron’s 400 Index highlights Morgan Stanley’s commitment to delivering innovative ways for our clients to enhance their portfolios.’

To assess their eligibility for inclusion, stocks are rated by fundamental criteria that measure the companies’ profitability, cash flow and growth and value style characteristics. Fundamental analysis and rating of stocks is conducted by MarketGrader, a Miami-based research firm.

Stocks must then pass additional rules-based screens applied by Dow Jones Indexes. They must have a minimum float-adjusted market capitalisation of USD250m, and at least 100 of the index’s 400 stocks must have a market capitalisation of more than USD3bn.

Index constituents must have reported quarterly or annual earnings results within six months prior to semi-annual reviews, and their stocks must have traded an average of at least USD2m daily for the preceding three months.

The top 400 stocks that meet these criteria are selected as components of the Barron’s 400 Index. Components are equal weighted and industries are capped at 20 per cent of the index to ensure diversification. Real estate investment trusts are ineligible for inclusion.

The index is reviewed in March and September. Estimated daily back-tested history is available back to December 1997.

Best known for the Dow Jones Industrial Average, Dow Jones Indexes also is co-owner of the pan-European Dow Jones Stoxx indices and together with Wilshire Associates provides the Dow Jones Wilshire Global Index family, which is anchored by the Dow Jones Wilshire 5000 and covers more than 12,000 securities in 59 markets. Dow Jones Indexes also maintains various alternative indices, including measures of the hedge fund and commodity markets.

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