S&P Indices has launched the S&P GIVI (“S&P Global Intrinsic Value Index), combining low volatility and an alternative weighting scheme that weight’s a stock by its calculated intrinsic value, rather than market-capitalisation.
S&P Indices has licensed the S&P GIVI (and its complete family of emerging market and developed sub-indices, a total of over 2000 indices across 46 countries and 7 currencies) to Goldman Sachs Asset Management (GSAM). Jim O’Neill, Chairman of GSAM, and Donald Mulvihill, Managing Director at GSAM, conceived the strategy and helped S&P Indices to develop this concept.
The S&P GIVI is constructed from the S&P Global BMI universe, a comprehensive, rules-based global index covering approximately 10,000 companies in 46 countries. Each stock in the S&P GIVI is weighted by its calculated intrinsic value. The intrinsic value of each stock is the sum of two components: the value of assets in place plus the value of growth opportunities
To achieve its goal of low volatility, S&P GIVI excludes, for each country represented in the S&P Global BMI, the 30% of market capitalisation with the highest beta. Remaining stocks are then weighted by a rules-based measure of intrinsic value, determined by book value and discounted projected earnings.
“The S&P GIVI provides investors with an alternatively weighted, low-volatility exposure to global equity markets,” says Alexander Matturri (pictured), Executive Managing Director at S&P Indices. “Alternatives to traditional market cap weighting are becoming increasingly important, as investors look beyond classic market beta for factors that influence performance and risk. The S&P GIVI combines exposure to two such factors – low volatility and intrinsic value- into one unique index.”
“Simplicity, transparency, diversification and low turnover were key goals in the index design,” says Jim O’Neill, Chairman of Goldman Sachs Asset Management. “GIVI’s methodology employs a passive strategy and the Index provides an alternative to market-cap weighted indices.”
The S&P GIVI is calculated in seven currencies: US dollars (USD), Euros (EUR), British pounds (GBP), Japanese Yen (JPY), Canadian dollars (CAD), Australian dollars (AUD), and Domestic Currency Return (DCR). The Index rebalances twice a year on the third Friday of March and September. Gross and net total return indices are calculated for all major components of the S&P GIVI.
The Index range will be expanded later this year to include an all-country index, called Global Growth, that has a country weighting scheme designed to provide higher weights to growth markets, with the goal of an allocation that better matches global economic activity and opportunities.