Key aspects of the modifications to the indices, which have been rebranded as AlphaSector INFInity, derived from “inflation neutral fixed income,” include an ability to “de-risk” in challenging markets by going 100% to short-term treasuries, expanding the fixed income sector exposure to include treasury inflation-protected securities (TIPs) and floating rate securities, and a revised investment algorithm that has an absolute return decision framework.
“Investors have recently had to weather two bear markets in equities, and now their concerns are increasingly turning to the risk of a crushing halt to the long-running bull market in bonds,” said Howard Present, president and chief executive of F-Squared Investments. “Bonds are a critical risk management tool, and client expectations for losses are almost non-existent. Therefore, while our fixed income indices have fully delivered on their investment mandate since their launch in 2009, we have been working since late last year to upgrade the design to make them ‘inflation neutral,’ or independent of the direction of interest rates.”
The enhanced INFInity indices will be automatically included within existing AlphaSector Allocator, Asset Allocation, and Target Risk indices and portfolios. The indices will also be made available as the basis for a stand alone separately managed account (SMA).