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Index IDEA: FTSE Russell examines low vol global stocks with minimum variance indexes

The FTSE All-World Developed Minimum Variance Index has risen 407% since September 2001, based on hypothetical historical performance, relative to a 180% rise for the FTSE All-World Developed Index for the same time periods.

And the FTSE All-World Developed Minimum Variance Index, which weights stocks according to their lower relative historical return volatility, has had a stronger return than the market cap weighted FTSE All-World Developed Index for the year-to-date, one-year, three-year, five-year and ten-year periods ended 5 May 2016.

Gareth Parker, senior director, research and analytics at FTSE Russell:
“Long-term growth for the FTSE All-World Developed Minimum Variance Index relative to the FTSE All-World Developed Index helps illustrate the effect that reducing overall index volatility while maintaing broad diversification may have on index performance over the longer term. This also helps demonstrate the value of working with a sophisticated global index provider that can work with clients to design indexes to help them better meet their overall investment objectives.”

Francois Millet, head of product line management ETF & indexing, Lyxor Asset Management:
“We like the fact that FTSE Russell has gone a step further than most providers of minimum variance indexes in its design of the FTSE All-World Developed Minimum Variance Index, applying diversification targets to reduce concentration and sector biases. Using this index as the basis for the Lyxor FTSE All World Minimum Variance UCITS ETF has allowed us to create a more diversified minimum variance ETF.”

FTSE All-World Developed Minimum Variance Index


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All information is provided for information purposes only. Every effort is made to ensure that all information given in this publication is accurate, but no responsibility or liability can be accepted by any member of the LSE Group nor their respective directors, officers, employees, partners or licensors for any errors or for any loss from use of this publication or any of the information or data contained herein.

Views expressed by Gareth Parker of FTSE Russell and Francois Millet of Lyxor Asset Management are as of May 12th and subject to change. These views do not necessarily reflect the opinion of FTSE Russell or the London Stock Exchange Group.

No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE All-World Developed Index or the FTSE All-World Developed Minimum Variance Index or the fitness or suitability of the indexes for any particular purpose to which they might be put.

No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing in this IDEA should be taken as constituting financial or investment advice. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any representation regarding the advisability of investing in any asset. A decision to invest in any such asset should not be made in reliance on any information herein. Indexes cannot be invested in directly. Inclusion of an asset in an index is not a recommendation to buy, sell or hold that asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

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Past performance is no guarantee of future results. Charts and graphs are provided for illustrative purposes only. Index returns shown may not represent the results of the actual trading of investable assets. Certain returns shown may reflect back-tested performance. All performance presented prior to the index inception date is back-tested performance. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index was officially launched. However, back- tested data may reflect the application of the index methodology with the benefit of hindsight, and the historic calculations of an index may change from month to month based on revisions to the underlying economic data used in the calculation of the index.

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