Morningstar Bond Indexes

Transcription

1 Morningstar Bond Indexes

2 Why Choose Morningstar Bond Indexes? Represent the global bond market accurately through Morningstar s comprehensive family of Bond Indexes Create stronger investment products built on our fully investible indexes Capitalize on the Morningstar brand, trusted across the global financial community for independence and reliability Leverage unprecedented transparency to access both index and bond-level data at any time, as well as understand our index construction rules

3 A Distinctive Index Model Covering every major asset category, Morningstar Indexes track equity, bond, and commodity markets and provide diversified asset-class exposure. Built on transparent, rules-based methodologies that are thoroughly back-tested and supported by proprietary research, Morningstar Indexes deliver pure and precise market exposure for better investment solutions. They act as accurate benchmarks for performance measurement, and discrete building blocks for portfolio construction. An Innovative Approach Morningstar s proactive approach and unique size and structure among index providers keep us at the cutting edge of innovation in index development. We stay abreast of market trends and events to capitalize on indexing opportunities, evaluating the relevance or emergence of new instruments, asset classes, and sub-classes, taking action to help shape marketplace solutions. A Trusted Benchmark The Morningstar Bond Index family tracks the global bond markets by sector and maturity range. Created independently and made broadly available to investors, our Bond Indexes provide trusted market benchmarks. Morningstar s independence means investors can use our index data without concerns about conflicts of interest. And while Morningstar Bond Indexes accurately capture market performance, they are also fully investible making them more easily replicable in investment products than other bond indexes. Portfolio-Friendly Structure With roughly one-third of the number of bonds (all liquid issues), the Morningstar Core Bond Index SM captures the same risk profile as the industry s most commonly used benchmark. Morningstar US Core Bond Barclays Capital US Aggregate Total Return (10-Year Annualized) 6.62% 6.44% Standard Deviation.9.82 Number of Bonds 2,465 8,02 Total Return Index Morningstar BarCap Data as of February 28, 2010

4 Unprecedented Transparency Indexes help fill a critical void in the bond market. Outside the institutional arena, data can be difficult to obtain. Our methodology for constructing and maintaining indexes as well as our philosophy of publishing our performance data set us apart from traditional fixed-income index providers. Unique Index Design Our Bond Indexes are designed to strike a balance: Broad enough to accurately reflect market risk profiles, but focused on liquid issues only. Other advantages to Morningstar s index design approach include: Morningstar makes performance data broadly accessible, with all index and bond-level data publicly available on websites, in publications, through data vendors, and within our products. This helps advisors and investors better understand and invest in the market. For institutions, Morningstar s transparent approach helps differentiate investment products built from our indexes by establishing credibility and trust among the investor community. Discrete building blocks Our simplified, portfolio-friendly design means each index in this integrated family represents a clearly defined exposure. With no overlap or gaps among sub-indexes, our indexes avoid unintended portfolio concentration or under-representation. Fully investible Designed to offer a passive replication of active manager strategies, our indexes closely align with practitioners views of the investment landscape. Our high minimum liquidity threshold for individual bonds keeps our Bond Indexes fully investible and easily replicable and manageable, while still accurately monitoring the market. Morningstar Bond Indexes Methodology and Advantages Discrete building blocks in an integrated index family High liquidity thresholds Transparency and ease of data availability Best available pricing Comprehensive market coverage, with no gaps or overlap, avoids unintentional portfolio concentration or underrepresentation. Manageable, fully investible, and replicable indexes accurately capture market trends and conditions. Widespread access to index and bond-level data enables independent evaluation. Employing trader pricing, supplemented with other pricing sources as needed, supports value analysis and leads to more accurate investing decisions.

5 Best available pricing Morningstar is committed to using the best bond pricing data available. The advent and rise in popularity of bond exchange-traded funds (ETFs) has exposed bond index limitations for generating reliable prices. Less frequent market trades lead to stale pricing on bond index underlying holdings, forcing index providers to interpolate bond prices using a technique called matrix pricing. Because our indexes contain fewer and more liquid issues, Morningstar has minimized the need to employ matrix pricing. We chiefly rely on trader pricing, with systems in place to leverage other pricing sources depending on market conditions. during construction of our Bond Indexes. The Global Fixed-Income Workbench allows access to all index information for analysis based on user-defined criteria. Clients can also drill down to the performance and characteristics of each individual bond. The tool allows clients to view aggregate, sub-index, and constituent-level customized information across asset classes and maturity ranges, and then use the resulting data to generate analytical reports. Powerful Analytical Capabilities Morningstar has developed a robust analytical tool that enables our index clients to easily analyze the underlying bond data we aggregate and verify Bond Index Family The Morningstar Core Bond Index SM features distinct and non-overlapping maturity buckets for sub-indexes, eliminating concerns about accidental overconcentration or underweighting. Sector indexes include US Government, Corporate, and Mortgage, with no overlapping sub-indexes. Clients can drill down for data in even more finely sliced categories than are represented here. US Global ex-us Europe US Government US Government Corporate US Government Corporate Corporate Developed Markets Developed Developed Markets Emerging Markets Markets Emerging Markets Emerging Markets Core Bond Core Bond Core Bond Mortgage Bond Mortgage Bond Mortgage Bond Bond Bond Bond Bond Bond Bond Global ex-us Global Government ex-us Global Bond Government ex-us Emerging Government Bond Markets Emerging BondComposite Markets Emerging Composite Markets Composite European Core European Bond Core European Bond Core Bond Short-Term Core Bond Short-Term Short-Term Short-Term Short-Term Short-Term Short-Term Short-Term Core US Bond Government Core US Bond Government Corporate US Government Corporate Short-Term Corporate Eurozone Eurozone Canada Eurozone Canada Canada Sovereign Sovereign Corporate Sovereign Corporate Government Government Government Government Government Government Corporate Eurozone Core Eurozone Bond Core Eurozone Bond Core UK Bond Core BondUK Core Bond UK Core Bond United United Australia United & Australia & Australia & Intermediate Intermediate Intermediate Intermediate Intermediate Intermediate Intermediate Intermediate Intermediate Mortgage Bond Mortgage Bond Mortgage KingdomBondKingdom New Zealand Kingdom New ZealandNew Zealand Core Bond Core US Bond Government Core US Bond Government Corporate US Government Corporate Corporate Government Government Government Government Government Government Eurozone Eurozone Eurozone Eurozone Eurozone UK Eurozone UK UK UK UK Government Government Corporate Government Corporate Government Corporate Government Corporate Government Corporate UK Corporate Long-Term Core Bond Long-Term Long-Term Long-Term Long-Term Long-Term Long-Term Long-Term Core US Bond Government Core US Bond Government Corporate US Government Corporate Long-Term Corporate Switzerland Switzerland Japan Switzerland Japan Japan Government Government Government Government Government Government Eurozone Eurozone Eurozone Covered BondCovered Bond Covered Bond

6 Capitalize on the distinctive design and transparent methodology of Morningstar Bond Indexes to create sound exchange-traded funds, mutual funds, structured products, or derivatives for markets around the world. Contact us to discuss licensing or to learn more about the Morningstar approach. Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. Introduced in 2002, the Morningstar Indexes family offers a broad range of equity, bond, commodity, and asset allocation indexes. Call US: g Europe: g Web indexes.morningstar.com indexes@morningstar.com 2010 Morningstar. All rights reserved. The Morningstar name and logo are registered marks of Morningstar. All other marks are the property of their respective owners. Cert no. SCS-COC-00955