Products June 17, 2009

MSCI Unveils Long/Short Indexes

MSCI Barra has launched a range of long/short factor indexes based on MSCI indexes and Barra risk models.
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The new indexes are designed to reflect the returns of a single Barra risk factor and a designated market in a replicable manner. They target the Barra Momentum, Value, Volatility, Earnings Yield, and Leverage risk factors.

“Factors such as Volatility and Leverage can play a significant role in determining portfolio risk and performance, and the availability of these long/short factor indices provides institutional investors with a valuable analytical tool for factor-based hedging and investment strategies,”said David Brierwood, chief operating officer at MSCI Inc., in a news release.

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Designed for use by institutional investors in U.S. and European equities, the eight new factor indexes are:

  • MSCI Europe Barra Momentum Index
  • MSCI Europe Barra Low Leverage Index
  • MSCI Europe Barra Low Volatility Index
  • MSCI Europe Barra Value Index
  • MSCI USA Barra Momentum Index
  • MSCI USA Barra Low Leverage Index
  • MSCI USA Barra Low Volatility Index
  • MSCI USA Barra Earnings Yield Index

The new indexes use an optimization process that is based on specified constraints and aims to achieve a specified high level of exposure to a single Barra factor, very low exposure to other factors and low tracking error to the corresponding MSCI index.

More information is available at www.mscibarra.com.

In Practice June 17, 2009

1 in 4 Americans Want to Give Financial Firm or Broker the Boot

A survey by Charles Schwab found that 25% of investors in the U.S. are considering changing financial services firms or brokers in the next year based on their overall frustrations with their current situation.
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An overwhelming majority of respondents (90%) said they are frustrated about the money they lost in the past year, and 76% said they are only somewhat confident in the guidance they receive from professionals, according to a news release of the results.

Only slightly more than half (55%) of respondents said they trust their current firm, and just a third (36%) think their firm is more stable than other firms.

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The survey found a top reason for investors to leave their current firm is “the financial stability of my firm being in question,”cited by 48% of respondents. In addition, cost and investment performance were cited by many as reasons they would consider leaving their firm (47% and 42%, respectively).

At the same time, Charles Schwab said many investors were wary of change, and when asked for reasons why they would stay with their current firm, responses included:

  • “I might lose money if I make a switch.”(26%)
  • “I don’t know of any better options.”(25%)
  • “It’s time-consuming to make a switch.”(22%)

When asked what they would like to be different about their financial firm or broker in the next year, the top responses related to the cost of working with them (34%), the quality of advice (32%), and the frequency of proactive contact (29%).

“With one in four Americans ready to make the move, investors are seeking a genuine partner they can trust to help them plan for the long-term,”said Andy Gill, senior vice president at Charles Schwab, in the release. “They are understandably frustrated by the last year and have responded by expecting more from the experts they turn to for guidance.”

 

Proactive Stance

 

However, investors are not just playing the blame game—they show interest in improving their financial situation. Fifty-one percent of those surveyed now review their finances at least once a day, compared to 27% prior to fall 2008. When asked what they are likely to do differently in the next year, the top responses were:

  • “Pay closer attention to how much money I have invested or saved.”46%)
  • “Set stricter budgets for myself or my household.” (45%)
  • “Pay closer attention to the state of the market.” (38%)
  • “Reevaluate my financial firms or providers more often.” (23%)

The Charles Schwab Make the Move Survey surveyed 500 respondents in the U.S. and was conducted by Kelton Research between June 4 and June 8, using an online survey.

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