S&P starts 130/30 index relative to S&P 500

By Susanna Moon

Chicago, Nov. 19 - Standard & Poor's said it launched the S&P 500 130/30 Strategy Index, which establishes 30% overweight and underweight positions relative to the S&P 500 index.

The index is rebalanced quarterly and at each rebalancing comprises a core long position in the S&P 500, plus 1% overweight positions in 30 S&P 500 constituent stocks (the long basket) and 1% underweight positions in 30 S&P 500 constituent stocks (the short basket).

To determine the long and short baskets, the index uses qualitative and quantitative factors.

Component stocks of the overweight basket each have their weights increased by 1% relative to the S&P 500, while stocks in the underweight basket each have their weights decreased by 1% relative to the S&P 500.

Since most stocks in the S&P 500 have less than 1% weight, underweight positions typically result in short exposures, according to a company press release.

The basket uses qualitative variables from analyst recommendations in the S&P global equity research group.

The analysts use a scale that is equivalent to a range from "strong sell" to "strong buy." The recommendations are overlaid with quantitative fundamental variables to arrive at the final long and short baskets.

"Our goal in strategy indexing is to offer efficient exposure to particular investment approaches rather than offer performance benchmarks," Srikant Dash, head of global research and design at S&P, said in the news release.

The index "provides risk-controlled, long/short exposure with the prospect of outperformance in a transparent, cost-efficient format," Dash added in the news release.

S&P provides financial market information such as credit ratings, indexes and investment research.

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