STOXX Limited has launched the STOXX True Exposure index family, (STOXX TRU), allowing investments in predefined countries or regions by selecting companies that have a dominant economic exposure to the targeted area.
By enabling investors to sharpen portfolio exposure to selected regions, these indices allow for improved asset allocation that significantly de-risks portfolios with the same regional allocations.
“In today’s interconnected world, having a portfolio that invests in a US, European and Asian market-cap benchmark leads to unintended regional overlaps of economic exposures, leaving investors with allegedly diversified portfolios that could have highly correlated returns,” says Hartmut Graf, chief executive officer, STOXX Limited. “Our STOXX TRU Indices help investors create an asset allocation based on truly separated geographic buckets. These buckets are significantly less correlated among each other compared with standard equity indices, resulting in an improved risk profile. The STOXX TRU Indices are based on a sophisticated and innovative model to identify a company’s economic exposure to a country or region, when a such a breakdown is not available explicitly.”
The basic index universe for the STOXX TRU index family is the respective STOXX country, broad or benchmark index. Companies with a minimum required revenue exposure (25%, 50%, 75%, 100%) to a targeted region or country are selected. In addition, a minimum average daily trading volume of more than 1 million euros is required to ensure investability. To maximise the benefits of the new index family, components are weighted by a combination of free-float market cap and revenue exposure to local market, subject to a 5% cap. Indices are reviewed annually in September.
STOXX has developed a proprietary estimator which is based on country- and industry-dependent figures on exports of goods and services to calculate this index family, which is a novelty in the market. The economic exposure of a company to a single country – if not already reported by the company directly – is derived by applying this innovative estimator on reported revenues.
The STOXX True Exposure Indices are calculated in price, net and gross return versions and available in the following currencies: EUR, USD, GBP (STOXX TRU UK), AUD (STOXX TRU Australia) JPY (STOXX TRU Japan) and CAD (STOXX TRU Canada). Historical data for this index family is available from Sep. 24, 2007.