Ground Rules. FTSE WMA Private Investor Index Series v3.3

Transcription

1 Ground Rules FTSE WMA Private Investor Index Series v3.3 ftserussell.com December 2015

2 Contents 1.0 Introduction Index structure Management responsibilities Queries and Complaints Review of weightings Calculation algorithm Appendix A: Calculation of total return indexes Appendix B: Exchange rates Appendix C: Further information FTSE Russell FTSE WMA Private Investor Index Series, v3.3, December 2015 d th ] 2 of 14

3 Section 1 Introduction 1.0 Introduction 1.1 This document describes the rules used to calculate the FTSE WMA Private Investor Indexes. 1.2 The primary purpose of the FTSE WMA Private Investors Indexes is to provide private investors and trustees with a measure of performance against which to compare their investment portfolios, based upon the assumption they are domestic UK investors with sterling denominated accounts. 1.3 These Indexes are produced by FTSE Russell, in conjunction with the Wealth Management Association (WMA). 1.4 FTSE Russell FTSE Russell is a trading name of Frank Russell Company (FRC), FTSE International Limited (FTSE) and FTSE TMX Global Debt Capital Markets, Inc. (FTSE TMX). FRC, FTSE and FTSE TMX are each benchmark administrators of indexes. References to FTSE Russell should be interpreted as a reference to the relevant benchmark administrator for the relevant index. 1.5 FTSE Russell hereby notifies users of the index that it is possible that circumstances, including external events beyond the control of FTSE Russell, may necessitate changes to, or the cessation of, the index and therefore, any financial contracts or other financial instruments that reference the index should be able to withstand, or otherwise address the possibility of changes to, or cessation of, the index. 1.6 Index users who choose to follow this index or to buy products that claim to follow this index should assess the merits of the index s rules-based methodology and take independent investment advice before investing their own or client funds. No liability whether as a result of negligence or otherwise is accepted by FTSE Russell (or any person concerned with the preparation or publication of these Ground Rules) for any losses, damages, claims and expenses suffered by any person as a result of: any reliance on these Ground Rules, and/or any errors or inaccuracies in these Ground Rules, and/or any non-application or misapplication of the policies or procedures described in these Ground Rules, and/or any errors or inaccuracies in the compilation of the Index or any constituent data. FTSE Russell FTSE WMA Private Investor Index Series, v3.3, December of 14

4 Section 2 Index structure 2.0 Index structure 2.1 There are five indexes, which represent a broad number of different portfolios. Their official names are: FTSE WMA Stock Market Income Index The Income Portfolio Index is designed to reflect the portfolio of a client requiring an income flow from their investment FTSE WMA Stock Market Growth Index The Growth Portfolio Index is designed to reflect the portfolio of a client requiring capital growth from their investment FTSE WMA Stock Market Balanced Index The Balanced Portfolio Index is designed to reflect the portfolio of a client requiring a balanced approach between income and capital growth in their portfolio FTSE WMA Stock Market Conservative Index The Conservative Portfolio Index is designed to reflect the portfolio of a client requiring a conservative approach from their investment FTSE WMA Stock Market Global Growth Index The Global Growth Portfolio Index is designed to reflect the portfolio of a client requiring global capital growth based on only equity indexes from their investment. 2.2 For Total Return Index calculations please refer to Appendix A. FTSE Russell FTSE WMA Private Investor Index Series, v3.3, December of 14

5 2.3 Each Portfolio Index consists of a combination of a set percentage of the performance of various indexes, to represent the performance of certain elements used to construct investment portfolios, in accordance with the table below. Asset Type in Portfolio UK Equities World Equities Bonds Cash Hedge Funds Commercial Property Developed World Equities Emerging World Equities Representative Index FTSE All-Share Index FTSE All-World ex UK Index, calculated in sterling FTSE Gilts All-Stocks Index 7-day LIBOR* Index WMA Investment Trust (Custom) Index WMA All UK Property (Custom) Index (NAV) FTSE All-World Developed Index FTSE All-World Emerging Index * London Interbank Offered Rate 2.4 Current and historic weightings used in each Portfolio Index are available using the link below: The WMA Investment Trust (Custom) Index is designed to reflect the portfolio of a client requiring exposure to multi-manager hedge funds. All index constituents are closed-ended UK quoted investment companies and they are classified under FTSE s Industry Classification Benchmark (ICB) in the Subsector Equity Investment Instruments (ICB code: 8985). For more information on ICB, please visit Each day s index value is calculated using the closing value for each of the five component indexes. 2.7 The WMA All UK Property (Custom) Index Assets comprises a selection of suitably qualifying property assets, identified and valued by the Index Advisor, MSS Real Estate LLP on behalf of WMA The WMA All UK Property (Custom) Index (NAV) aims to provide a daily measure of the performance of the universe of investable, institutional grade commercial property in the UK appropriately diversified by Market Sector which comprise Retail, Office and Industrial Property The base currency for the WMA All UK Property (Custom) Index (NAV) is Pounds Sterling, and the index is calculated daily, on an end of day basis, two business days in arrears The values of these indexes is derived directly from the asset values of the WMA All UK Property (Custom) Index which comprises investable property assets available in the market, the NAV is adjusted for, inter alia, the full running costs of an investable index fund, and the effects of gearing that may be present in the underlying investments. FTSE Russell FTSE WMA Private Investor Index Series, v3.3, December of 14

6 Section 3 Management responsibilities 3.0 Management responsibilities 3.1 FTSE International Limited (FTSE) FTSE is responsible for the operation of the FTSE WMA Private Investor Index Series. 3.2 The management and calculation of the Portfolio Indexes is undertaken by FTSE, assisted by the FTSE/WMA Advisory Committee. 3.3 FTSE/WMA Advisory Committee FTSE Russell has established the FTSE Wealth Management Association (WMA) Indices Advisory Committee (the Committee) The role of the FTSE/WMA Advisory Committee is to provide a forum for debating proposed changes to the Ground Rules of the FTSE WMA Private Investor Indexes; recommend changes to the Ground Rules of the FTSE WMA Private Investor Indexes; comment on the asset allocation weightings for the underlying indexes in response to the quarterly survey results presented by WMA. 3.4 The FTSE/WMA Advisory Committee meets quarterly in early March, June, September and December. Its membership is selected jointly by FTSE Russell and WMA and aims to represent stockbrokers and investment managers servicing investment portfolios for private investors and trustees. The Committee Chairman is nominated by WMA. 3.5 Amendments to these Ground Rules These Ground Rules shall be subject to regular review by FTSE Russell to ensure that they continue to meet the current and future requirements of investors and other index users. The review process will include consultation on any proposed changes with the FTSE/WMA Advisory Committee As provided for in Rule 3.6, where FTSE Russell or the FTSE Russell Regional Advisory Committees determine that the Ground Rules are silent or do not specifically and unambiguously apply to the subject matter of any decision, any decision shall be based as far as practical on the Statement of Principles. After making any such determination, FTSE Russell shall advise the market of its decision at the earliest opportunity. Any such treatment will not be considered as an exception or change to the Ground Rules, or to set a precedent for future action, but FTSE Russell will consider whether the Ground Rules should subsequently be updated to provide greater clarity. FTSE Russell FTSE WMA Private Investor Index Series, v3.3, December of 14

7 3.6 Statement of Principles for FTSE Russell Market Capitalisation Weighted Equity Indexes (the Statement of Principles) Indexes need to keep abreast of changing markets and the Ground Rules cannot anticipate every eventuality. Where the Rules do not fully cover a specific event or development, FTSE Russell will determine the appropriate treatment by reference to the Statement of Principles which summarises the ethos underlying FTSE Russell s approach to index construction. The Statement of Principles is reviewed annually and any changes proposed by FTSE Russell are presented to the FTSE Russell Policy Group for discussion before approval by FTSE Russell s Governance Board. Please use the following link for a copy of FTSE Russell s Statement of Principles. FTSE Russell FTSE WMA Private Investor Index Series, v3.3, December of 14

8 Section 4 Queries and Complaints 4.0 Queries and Complaints FTSE Russell s complaints procedure can be accessed using the following link: FTSE Russell FTSE WMA Private Investor Index Series, v3.3, December of 14

9 Section 5 Review of weightings 5.0 Review of weightings 5.1 The component indexes of each Portfolio Index and the weights each represents within each Portfolio Index are reviewed quarterly by the FTSE/WMA Advisory Committee. 5.2 The decisions of the FTSE/WMA Advisory Committee are published as soon as possible after the Committee meeting is concluded, and are available from FTSE Russell and WMA. Decisions are implemented at the committee and FTSE Russell s discretion with a minimum of a month s notice. FTSE Russell FTSE WMA Private Investor Index Series, v3.3, December of 14

10 Section 6 Calculation algorithm 6.0 Calculation algorithm 6.1 The Portfolio Indexes are calculated using the following formula: Where: (( c C c Wc) + 1) 1 Pc Cc = Wc = Pc = Percentage rise (fall) in component index since the last rebalancing date Percentage weight of component index in Portfolio index Value of Portfolio index on the last rebalancing date 6.2 The Portfolio Indexes will be displayed to two decimal places. FTSE Russell FTSE WMA Private Investor Index Series, v3.3, December of 14

11 Appendix A: Calculation of total return indexes Total return index (TRI) values of the FTSE WMA Private Investor Index Series are calculated as follows: UK Equities as represented by the FTSE All-Share Index: TRI indexes use the FTSE All-Share Total Return Index, as published daily. World Equities as represented by the FTSE All-World Ex UK Index: TRI indexes use the FTSE All-World ex UK Total Return Index, as published daily. The return index calculations add the income a stock s dividend provides to the performance of the index. The calculation can be expressed as: RI i = RI i-1 X i / ( X i-1 - ( AD i / ( M i / X i ) ) ) where i = Time period RI i = Return Index at time i. Xi = Capital Index at time i. X i-1 = Capital Index at time i-1. AD i = Market Value of Dividends effective at time i. M i = Market capitalisation of constituents at time i. Note the formula ( AD i / ( M i / Xi ) ) calculates the XD adjustment for an index. Bonds as represented by the FTSE Gilts All-Stocks Index: - TRI indexes use the FTSE Gilts All-Stocks Index. The Total Return Index for day t, Rs,t, is calculated from the Price index and XD adjustment by: R t = R t 1 I t 1 I t XD where I t = price index for day t XD t = XD adjustment factor for day t. t FTSE Russell FTSE WMA Private Investor Index Series, v3.3, December of 14

12 As the XD adjustment factor for a total return index is zero whenever there are no dividend payments on the day. Hence the percentage movement in the total return index is identical to that of the gross price index whenever there is no dividend payment. Cash as represented by the London Interbank Offered Rate (LIBOR) minus 1%. TRI indexes use LIBOR 1% Hedge Funds as represented by the WMA Investment Trust (Custom) Index. TRI indexes use the WMA Investment Trust (Custom) Total Return. UK Commercial Property as represented by the WMA All UK Property (Custom) Index (NAV)* TRI indexes use the WMA UK Commercial Property Index (NAV) Total Return. Developed World Equities as represented by the FTSE All-World Developed Index: TRI indexes use the FTSE All-World Developed Total Return Index, as published daily. Emerging World Equities as represented by the FTSE All-World Emerging Index: TRI indexes use the FTSE All-World Emerging Total Return Index, as published daily. * The WMA UK Commercial Property Index is designed to provide a daily measure of the performance of the universe of investable, institutional grade commercial property in the UK appropriately diversified by Market Sector. FTSE Russell FTSE WMA Private Investor Index Series, v3.3, December of 14

13 Appendix B: Exchange rates For the FTSE WMA Private Investor Index Series, the exchange rates used are detailed in the following table: FTSE Indexes Exchange Rates FTSE WMA Stock Market Income Index Spot Rates at the Index closing time (16:30) FTSE WMA Stock Market Growth Index Spot Rates at the Index closing time (16:30) FTSE WMA Stock Market Balanced Index Spot Rates at the Index closing time (16:30) FTSE WMA Stock Market Conservative Index Spot Rates at the Index closing time (16:30) FTSE WMA Stock Market Global Growth Index Spot Rates at the Index closing time (16:30) FTSE All-Share Index Spot Rates at the Index closing time (16:30) FTSE All-World ex UK Index WM/Reuters Closing Spot Rates WM Company (16:00) FTSE Gilts All-Stocks Index Spot Rates at the Index closing time (16:30) WMA Investment Trust (Custom) Index Spot Rates at the Index closing time (16:30) WMA All UK Property (Custom) Index (NAV) WM/Reuters Closing Spot Rates WM Company (16:00) FTSE All-World Developed Index WM/Reuters Closing Spot Rates WM Company (16:00) FTSE All-World Emerging Index WM/Reuters Closing Spot Rates WM Company (16:00) FTSE Russell FTSE WMA Private Investor Index Series, v3.3, December of 14

14 Appendix C: Further information A Glossary of Terms used in FTSE Russell s Ground Rule documents can be found using the following link: For further information on the FTSE WMA Private Investor Index Series Ground Rules visit or info@ftse.com. Contact details can also be found on this website. WMA 22 City Road, Finsbury Square, London, EC1Y 2AJ Tel: +44 (0) London Stock Exchange Group companies. London Stock Exchange Group companies includes FTSE International Limited ( FTSE ), Frank Russell Company ( Russell ), MTS Next Limited ( MTS ), and FTSE TMX Global Debt Capital Markets Inc ( FTSE TMX ). All rights reserved. FTSE, Russell, MTS, FTSE TM X and FTSE Russell and other service marks and trademarks related to the FTSE or Russell indexes are trademarks of the London Stock Exchange Group companies and are used by FTSE, MTS, FTSE TMX and Russell under licence. All information is provided for information purposes only. Every effort is made to ensure that all information given in this publication is accurate, but no responsibility or liability can be accepted by the London Stock Exchange Group companies nor its licensors for any errors or for any loss from use of this publication. Neither the London Stock Exchange Group companies nor any of their licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE Russell Indexes or the fitness or suitability of the Indexes for any particular purpose to which they might be put. The London Stock Exchange Group companies do not provide investment advice and nothing in this document should be taken as constituting financial or investment advice. The London Stock Exchange Group companies make no representation regarding the advisability of investing in any asset. A decision to invest in any such asset should not be made in reliance on any information herein. Indexes cannot be invested in directly. Inclusion of an asset in an index is not a recommendation to buy, sell or hold that asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the London Stock Exchange Group companies. Distribution of the London Stock Exchange Group companies index values and the use of their indexes to create financial products require a licence with FTSE, FTSE TMX, MTS and/or Russell and/or its licensors. The Industry Classification Benchmark ( ICB ) is owned by FTSE. FTSE does not accept any liability to any person for any loss or damage arising out of any error or omission in the ICB. Past performance is no guarantee of future results. Charts and graphs are provided for illustrative purposes only. Index returns shown may not represent the results of the actual trading of investable assets. Certain returns shown may reflect back-tested performance. All performance presented prior to the index inception date is back-tested performance. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index was officially launched. However, back-tested data may reflect the application of the index methodology with the benefit of hindsight, and the historic calculations of an index may change from month to month based on revisions to the underlying economic data used in the calculation of the index. FTSE Russell FTSE WMA Private Investor Index Series, v3.3, December of 14