By: Mat Lystra, Senior Research Analyst
What makes a great index? A typical response might be “performance”—particularly with reference to smart beta indexes which may offer the potential for enhanced index returns over traditional market capitalization indexes. But performance isn’t the only—or even the most important — way to gauge the value of a benchmark. The better index, therefore, isn’t necessarily the one with the best returns; rather it is one that clearly defines the universe of securities it is measuring, doing so consistently with disciplined, transparent methodology.