Dow Jones Indexes creates Dow Jones Real Return Target Date Index series

By Devika Patel

Knoxville, Tenn., Feb. 21 - Dow Jones Indexes said it has formed a new series of indexes designed to serve as benchmarks for lifecycle portfolios that start out aggressively to grow assets and end with a conservative mix of investments based on the portfolio's "target date."

Each index in the Dow Jones Real Return Target Date Indexes represents a mix of sub-indexes representing stocks and bonds, Treasury Inflation Protected Securities - guaranteed by the United States government to pay interest above the rate of inflation - as well as commodities and real estate, which potentially counterbalance inflation.

The Dow Jones Real Return Target Date Indexes comprise 11 indexes, nine with target dates in five-year intervals out to 2045, and a Dow Jones Real Return 40+ Index and Dow Jones Real Return Today Index. Each index is a composite of sub-indexes that represent stocks, bonds, TIPS, commodities and real estate securities. The sub-indexes are the Dow Jones Wilshire Global Total Market Index, Lehman Aggregate Bond Index, Lehman U.S. Treasury Inflation Protected Securities Index, Dow Jones-AIG Commodity Index and Dow Jones Wilshire Real Estate Securities Index.

The component asset classes are weighted within each index to measure a targeted level of risk. Stocks and bonds are classified as nominal assets with high- and low-risk profiles, respectively. Real estate securities and commodities are considered real assets with high-risk profiles, and U.S. Treasury Inflation Protected Securities are considered real assets with a low-risk profile.

Over time the weights are adjusted based on predetermined formulas to adjust the risk level systematically as the index's target date approaches.

"We were the first index provider to create benchmarks for retirement portfolios, first with the Dow Jones Relative Risk Indexes in 2001 and then the Dow Jones Target Date Indexes in 2005. As more plan sponsors pursue target date strategies in light of the Pension Protection Act, market participants require more choice when selecting their benchmarks. The Dow Jones Real Return Target Date Indexes are differentiated because they include a diversified mix of asset classes as well as measure inflation-adjusted performance, or the 'real' return, of a target date portfolio," Dow Jones Indexes' president Michael A. Petronella said in a press release.

New York-based Dow Jones Indexes develops, maintains and licenses indexes for use as benchmarks and as the basis of investment products.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.