S&P Dow Jones changes methodology for high quality preferred index

By Angela McDaniels

Tacoma, Wash., Dec. 5 – S&P Dow Jones Indices is changing the methodology it uses with the S&P U.S. High Quality Preferred Stock index, according to a company news release.

Effective with the quarterly rebalance in January, the preferred stock issuers in the index will be equally weighted, and the component securities of each issuer will then be equally weighted.

Under the current methodology, preferred stock issues are categorized as either cumulative or noncumulative. The cumulative category is given a 75% weight, and the noncumulative category is given a 25% weight.

Within each of these two categories, securities are then equally weighted.

To reduce concentration risk, the maximum weight of each issuer is capped at 22.5% at each rebalancing.

The company is making the changes after consulting with members of the investment community. The consultation was announced Oct. 12 and ended Nov. 11.

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