Sabrient Systems, LLC, an independent equity research firm that specialises in alpha extraction through quantitative and qualitative analysis, has collaborated with Thomson Reuters to provide two alpha generating, low volatility indices for license by ETF distributors, mutual funds, and asset managers; the Thomson Reuters/Sabrient Sensible Growth Low Volatility Index and the Thomson Reuters/Sabrient Sensible Growth Index.
The indices’ proprietary formula for distinguishing between undervalued and overvalued companies based on short and longer-term growth metrics differentiate these indices from others in the market. They combine Sabrient’s fundamentally-based approach of picking growth and value stocks with Thomson Reuters’ experience of calculating real time indices which are tracked by investment vehicles. The TR/S Sensible Growth Low Volatility Index is a Long/Short index and the TR/S Sensible Growth Index is a Long index; both indices have a validated 10-year historical performance backtest.
“Our collaborative agreement allows our clients to leverage Sabrient’s specialized intellectual property and, with these new products, to continue to generate alpha despite today’s tough market conditions,” says Steven Carroll, Head of Thomson Reuters Indices.
“Working with such a well-respected firm provides our clients with third party validation and branding through Thomson Reuters’ independently backtested results,” says Scott Brown (pictured), President of Sabrient. “We perceived an increased need for low-volatility products in the market and wanted to provide ETF distributors and fund managers with alternative indices that leverage a unique methodology applied across large quantities of data, to generate robust risk-adjusted returns.”
The Thomson Reuters/Sabrient Indices employ several quantitative factors, including quality of earnings to rank all US listed stocks by current and prospective growth and valuation. The top 100 of these stocks are equally weighted to form the TR/S Sensible Growth Index whilst the top 50 and bottom 50 are equally weighted to form the TR/S Sensible Growth Low Volatility Index. Index constituents must be covered by at least three analysts and have a market capitalisation of at least USD150 million in order to be included in the index.
