S&P Unveils S&P 500-Linked Indexes

April 20, 2011

 

Standard & Poor’s Indices expanded its family of alternatively weighted indexes with the launch of two new benchmarks linked to the S&P 500 Index that focus on low volatility and high beta measures, both of which have been licensed to Invesco PowerShares for underlying ETFs.

The S&P 500 Low Volatility Index will measure the performance of the 100 least volatile stocks in the S&P 500, in a basket of securities that should be particularly attractive in times of weak markets.

The securities are weighted relative to the inverse of their corresponding volatility, meaning the most volatile stock has the lowest weight in the mix, the company said in a press release.

The S&P 500 High Beta Index will comprise the 100 securities most sensitive to changes in market returns within the S&P 500 Index pool, sensitivity being measured by the beta of an individual stock. The highest-beta stocks will weigh the most in the portfolio.

The high-beta methodology should cater to investors who want to take a bullish strategic or tactical view of the U.S. stock market, S&P said.

“We believe that a high beta portfolio allows investors to increase their exposure to the equity market without using leverage,” Invesco PowerShares’ head Ben Fulton said in the release. “In addition, we believe that a low volatility portfolio may offer protection in down cycles while still participating in upward trending cycles.”

Wheaton, Ill.-based ETF firm Invesco PowerShares, best known for its PowerShares QQQ ETF (NYSEArca: QQQ) of Nasdaq’s 100 biggest companies, already offers an array of S&P-linked ETFs that include a lineup of S&P Small Cap Sector ETFs, as well as the S&P 500 BuyWrite Portfolio (NYSEArca: PBP) and the S&P 500 High Quality Portfolio (NYSEArca: PIV).

The S&P 500 Index is one of the world’s most followed stock market indicators, with more than $4.83 trillion benchmarked to it and over $1.1 trillion directly indexed, according to S&P.

The new indexes will be rebalanced quarterly.

 

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