June 30, 2011
MSCI has launched three new risk-based indices: the MSCI ACWI Risk Weighted Index, the MSCI Emerging Markets Risk Weighted Index and the MSCI World Risk Weighted Index. These join MSCI’s existing family of alternatively weighted indices which are intended to capture the returns of specific investment strategies. In contrast, a standard market cap index captures market return.
Each of the new indices is based on a parent cap weighted MSCI index but reweights the parent’s constituents to give higher weights to stocks with historically lower volatility. Consequently the realised volatility of each MSCI Risk Weighted Index is lower than that of its parent.
“We think our risk-based indices in particular provide a tool to help clients efficiently mitigate risk in a disciplined and low cost manner,” said Remy Briand, Managing Director and Head of Index Research.
The new index series is just the latest non-traditional family of benchmarks to come out of the MSCI shop. In the past few years, the firm has also debuted minimum volatility and value-weighted series.