S&P Dow Jones, BM&FBovespa sign agreement, launch five Brazilian indexes

By Tali Rackner

Norfolk, Va., May 12 – S&P Dow Jones Indices and BM&FBovespa announced the signing of a strategic agreement to create and launch new, co-branded equity Brazilian indexes, according to a press release.

The two also launched the S&P/Bovespa family of smart beta indexes, the first series of indexes that are the result of the agreement. The five indexes measure the performance of stocks within the Brazilian equity markets based on exposure they provide to respective risk factors and are the first suite of smart beta indexes in Brazil.

According to the release, the S&P/Bovespa Low Volatility index tracks the performance of the top quintile of stocks in the Brazilian equity market, defined by the S&P Brazil Broad Market Index (BMI), that have the lowest volatility, as measured by standard deviation.

The S&P/Bovespa Inverse-Risk Weighted index calculates the performance of the Brazilian equity market with stocks weighted based on the inverse of their volatility. It provides the exposure to the low volatility factor using a tilted approach.

The S&P/Bovespa Quality index measures the performance of the top quintile of high-quality stocks in the Brazilian equity market as determined by their quality score. This score is calculated based on return on equity, accruals ratio, and financial leverage ratio, the release said.

The S&P/Bovespa Momentum index computes the performance of the top quintile of securities in the Brazilian equity market that exhibit persistence in their relative performance, measured by their risk adjusted price momentum.

The S&P/Bovespa Enhanced Value index tracks the performance of the top quintile of stocks in the Brazilian equity market with attractive valuations based on "value scores" calculated using three fundamental measures: book value-to-price, earnings-to-price, and sales-to-price.

"As the Brazilian financial market develops, BM&FBovespa continues to play an integral role for both local and international investors," S&P Dow Jones CEO Alex Matturri said in the release.

"Through this agreement, S&P Dow Jones Indices expands its mission of bringing greater index-based solutions, research, ideas, and analysis to the markets of Latin America. By launching this family of smart beta indices in Brazil, we are meeting the evolving needs of investors throughout the world for benchmarks that tilt towards certain styles, sectors, and factors."

New York-based S&P Dow Jones Indices is a part of McGraw Hill Financial and provides index-based concepts, data and research. Bovespa is a securities exchange operator based in Sao Paulo.

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