Dow Jones has agreed to develop and co-brand an index family with risk management research consulting firm LSP Partners LLC, which will utilize a proprietary strategy created by LSP Partners founder and CEO, Ralph Vince.
The companies created the Leverage Space Portfolio (LSP) strategy, which “seeks to maximize the probability of equity portfolio profitability by employing a risk-control process focused on capital preservation and drawdown management. Compared to a traditional buy-and-hold portfolio, an LSP-based portfolio aims for more consistent returns with lower risk.”
The indexes, scheduled to be launched in the second half of 2011, can serve as the basis of both passive and active investment funds, including exchange-traded funds, mutual funds, and institutional accounts around the world, according to the firms.
“We believe the marketplace will welcome our new family of indexes that applies this unique portfolio risk-management theory,” said Michael A. Petronella, President, Dow Jones Indexes. "These innovative techniques aspire to change the paradigm of the professional investment management process while providing Dow Jones Indexes with an opportunity to expand our roster of risk-based indexes.”
According to the announcement, Dow Jones Indexes has fully automated all elements of the LSP strategy, allowing for universal, systematic, and transparent application of a rules-based strategy to equity portfolios of any size or composition.
“The association with Dow Jones Indexes is, to us, a commercial validation on the highest order of our portfolio management ideas,” LSP Partners’ Vince said. “We're extremely proud to collaborate with the world’s foremost index provider.”