The fact that STOXX is, and has always been, committed to delivering highly innovative and transparent index concepts to the market is underscored by the fact that the firm has won the etfexpress Award for Most Innovative Index Provider for the third consecutive year – the first industry member to complete such a hat-trick.
In 2011, STOXX continued to expand its global range of indices. As of the end of February this year it had launched more than 1,200 new indices, including a global benchmark and an extensive palette of various country, region and industry indices.
To complement the new global index family, and to underline STOXX’s continuing commitment to innovation, a set of innovative strategy indices was launched for all regional and country blue-chip indices, including risk control indices and several short and leveraged indices.
Through the use of risk control indices, country positions can be controlled precisely according to defined key risk figures. The volatility of an index portfolio is kept consistent at 5 or 10 percent, for example, by the use of a regularly occurring regrouping between the money market and the corresponding stock portfolio. Portfolio managers use products based on these indices to keep the risk budget constant. This not only makes risk management easier, it also keeps portfolio managers from having to make regular adjustments.
Another milestone for STOXX in the past 12 months was the launch of the STOXX Global ESG Leaders Family. Its transparency, a comprehensible and objective selection process with a strong database, and the possibility for flexible weightings of the key aspects of sustainability set a new standard for sustainable investments.
The methodology of these new indices is based on transparent rules for the selection of the most sustainable firms from a universe of 1,800 companies as represented by the STOXX Global 1800 Index. First, the companies that are not eligible for the sustainability index are removed from the range of possible investments based on the exclusion criteria. In addition, companies that are severely in breach of the UN Global Compact Compliance Principles are ruled out.
Secondly, the most sustainable companies in the areas of environmental and social performance and best practices in corporate governance are selected, a process based on key performance indicators derived from data provided by Sustainalytics.
Overall, the indices consider more than 130 KPIs. For inclusion in one of the three sub-indices, companies need to have a score of at least 50 points in each area. A score of 75 or more points in the environmental, social or governance areas indicates that the company ranks in the top quartile of its industry, a rank necessary to be included in the respective index.
The selected companies are weighted based on their overall score in each sub-index. If a company is among the top 25 per cent in more than one area, it can be included in two or all three indices. This leads to a stronger weight in the STOXX Global ESG Leaders Index, which itself is weighted equally among all three sub-indices.
STOXX chief executive Hartmut Graf (pictured) says: “Being the first company to win any award from ETF Express for three consecutive years is a great honour. Being named most innovative index provider once again also is proof that the market, as represented by ETFexpress’s global readership, values STOXX as the innovative index provider we strive to be every day.”
Please click here now to download a copy of the etfexpress Awards 2012 special report
