Index provider MSCI has launched 13 indices composed through a new methodology that skews investors towards stocks with lower valuations.
The stocks in each index are re-weighted according to four fundamental accounting variables, including sales, earnings, cash earnings and book value.
"The MSCI Value Weighted Indices are based on a transparent index methodology and can provide a basis for a passive and cost-effective exposure to what value investors often refer to as the 'value premium' or the 'mispricing' of value stocks over time," MSCI managing director and head of index research Remy Briand said.
"The MSCI Value Weighted Indices are part of the broader family of MSCI Strategy Indices that seek to capture, in a codified way, some of the well-researched sources of systematic return," he said.
The new indices are based on several existing MSCI indices, including the MSCI World Value Weighted Index, the MSCI Emerging Markets Value Weighted Index, and the MSCI EAFE Value Weighted Index.
There are no new stocks added to the index, which helps maintain the trading liquidity, investment capacity and turnover characteristics of the parent index.
The launch of the new indices is in response to a growing demand for broad market indices that are not based on capitalisation, because the capitalisation method skews investors to the largest companies and not necessarily the ones with the most growth potential.
"While traditional capitalisation weighted indices remain the most efficient tools for capturing market beta, investors have increasingly recognised that there are additional sources of systematic return associated with particular investment styles and strategies, including value, momentum, or volatility, the company said.
MSCI is now scoping the Australian market for interest in the new products.
"We are in discussions with institutions to ascertain their interest in an MSCI Australia and MSCI World ex-Australia Value Weighted index," MSCI Australia executive director Michael Anderson said.
