S-Network Large Cap Sharpe Ratio Index

Transcription

1 S-Network Large Cap Sharpe Ratio Index Q1 2016

2 Index Rationale The Sharpe Ratio is a Key Measure of Financial Performance The Sharpe Ratio is Widely Used by Financial Professionals The Sharpe Ratio is Used to Identify Return Per Unit of Risk The S-Network Sharpe Ratio Index Uses the Sharpe Ratio to Assemble a Portfolio of Stocks: That Have Shown Superior Performance Relative to Risk The S-Network Large Cap Sharpe Ratio Index Offers a Pure Play, Rules-Based Index. 2

3 Index Characteristics Well-Established Universe of Index Candidates S&P 500 Serves as Universe for SHRPX SHRPX Comprises 50 Constituents Stocks Must Meet All Screens Needed to Qualify for the Leading Large-Cap US Equity Benchmark Index Diversified by Sector Five Stocks with the Highest Sharpe Ratios in Each of the Ten Sectors Comprising the S&P 500 are Selected for Inclusion in SHRPX, Assuring Diversification Across All Sectors Entirely Rules-Based Depends on a Clearly Defined Rules-Based Methodology No Discretion is Exercised in Compiling the Index Pre-Defined Screening Protocol Assures a Consistent, Transparent and Arms-Length Compilation Process The S-Network Large Cap Sharpe Ratio Index Offers a Pure Play, Rules-Based Index. 3

4 Unexploited ETF Opportunity With Stellar Performance Concept Can Be Conveyed in Short Elevator Pitch Sharpe Ratio Well Understood by Market Participants Methodology Mirrors Methodology of SDOGX Sharpe Ratio Index (SHRPX) Provides First Mover Advantage Concept Not Introduced in US Market Best of Both Worlds: Combines Price Performance with Low Volatility Performance Can Be Stated in 3 Simple Sentences SHRPX Outperforms S&P 500 in 13 of 16 Years SHRPX Average Outperformance = 8.5% SHRPX Average Underperformance = -1.2% Outperforms Market in 43 Out of 64 Quarters (67%) Outperforms Market in 118 Out of 193 Months (61%) In an increasingly Crowded ETF Market, SHRPX Offers First Mover Advantage Backed by an Academically Rigorous Driver and Outstanding Performance 4

5 Index Performance

6 Historical Performance S-Network Sharpe Ratio TR Index vs. S&P 500 TR Index (12/31/1999 3/31/2016) YTD Performance: SHRPXTR is up 2.59%, SPXT is up 1.35% Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 SHRPXTR Index SPXT Index *To ensure fair comparisons, all of the starting index values are normalized to 1,000 as of December 31, Source: S-Network, as of 3/31/2016 The S-Network Large Cap Sharpe Ratio Index Offers Consistent Performance Over Time, Regularly Outperforming the S&P 500 and Other High Dividend Indexes. 6

7 SHRPX (vs) SDOGX 7,000 6,000 S-Network Sector Dividend Dogs Index vs. S-Network Large Cap Sharpe Ratio Index (12/31/1999 3/31/2016) There is little overlap between the constituents of SHRPX and SDOGX. YTD Performance: SHRPXTR is up 2.59%, SDOGXTR is up 10.65%. 5,000 4,000 3,000 2,000 1,000 0 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 S-Network Large Cap Sharpe Ratio Index S-Network Large Cap Sharpe Ratio TR Index S-Net SectorDvdDogs Index S-Net SectorDvdDogs Index TR *To ensure fair comparisons, all of the starting index values are normalized to 1,000 as of December 31, Source: S-Network, as of 3/31/2016 The Total Return Performance of SHRPX is Comparable to SDOGX, but SHRPX Derives Substantially More of Its Performance from ETF-Friendly Capital Gains Rather than Dividends. 7

8 Index Constituents & Fundamentals

9 Index Constituents Consumer Discretionary Consumer Staples Energy Financials* Health Care Coach Inc Campbell Soup Co CONSOL Energy Inc Allstate Corp Baxalta Inc Dollar General Corp Mattel Inc Michael Kors Holdings Ltd Hormel Foods Corp Kimberly-Clark Tyson Foods Inc A Cabot Oil & Gas A EQT Corporation Exxon Mobil Corp Cincinnati Financial Corp Marsh & McLennan Companies Nasdaq Inc Edwards Lifesciences Corp Intuitive Surgical Inc Schein Henry Inc Urban Outfitters Wal-Mart Stores Spectra Energy Corp Progressive Corp Unitedhealth Group Inc Industrials Information Technology Materials Telecommunication Services Utilities Fastenal Co CA Inc Airgas Inc AT&T Inc CMS Energy Corp Grainger W.W. Inc Nielsen Holdings plc Republic Services Inc EMC Corp First Solar Inc PayPal Holdings Inc. Alcoa Inc Freeport-McMoRan Inc Newmont Mining Corp CenturyLink Inc Frontier Communications Corp Level 3 Communications Consolidated Edison Inc Edison Intl NextEra Energy Inc The ADT Corp. QUALCOMM Inc Sealed Air Corp Verizon Communications Inc WEC Energy Group Inc Source: S-Network, as of 3/21/2016 The S-Network Large Cap Sharpe Ratio Index Offers Diversification by Sector and Company, Avoiding Concentrated Risk. 9

10 Sector Weight Comparison 25.00% SHRPX Index vs. S&P 500 Index 20.00% 15.00% 10.00% 5.00% 0.00% Energy Materials Industrials Consumer Disc. Consumer Staples Health Care Financials Information Tech. Telecom Services Utilities S&P 500 Weight SHRPX Weight Source: S-Network, as of 3/21/2016 The S-Network Large Cap Sharpe Ratio Index Avoids Concentration in Those Sectors Offering the Highest Sharpe Ratios. 10

11 Index Fundamentals Index Fundamentals Market Capitalization Profile Number of Constituents 50 Total Market Capitalization Largest Market Capitalization Smallest Market Capitalization Average Market Capitalization Median Market Capitalization 2.03 Trillion USD Billion USD 2.69 Billion USD Billion USD Billion USD Source: S-Network, as of 3/21/2016 Solid Fundamentals and a Large Capitalization Bias Help Mitigate Risks in the S-Network Large Cap Sharpe Ratio Index. 11

12 Statistical Profiles

13 Statistical Profile I Calendar Year Ending Price Appreciation SHRPXTR Index S&P 500 TR Index Out/Underperformance 12/31/ % -9.10% 18.37% 12/31/ % % 7.77% 12/31/ % % 5.40% 12/31/ % 28.68% 17.79% 12/31/ % 10.88% 14.65% 12/31/ % 4.91% 10.20% 12/31/ % 15.79% 5.73% 12/31/ % 5.49% 11.05% 12/31/ % % -1.40% 12/31/ % 26.46% 18.08% 12/31/ % 15.06% 1.04% 12/31/ % 2.11% -0.76% 12/31/ % 16.00% -1.48% 12/31/ % 32.39% 4.61% 12/31/ % 13.69% 1.23% 12/31/ % 1.38% 1.10% YTD 2.59% 1.35% 1.25% Source: S-Network, as of 3/31/2016 The S-Network Large Cap Sharpe Ratio Total Return Index has Outperformed the S&P 500 Total Return Index in Thirteen of the Last Sixteen Years. 13

14 Statistical Profile II Total Return Appreciation SHRPXTR Index S&P 500 TR Index Since Inception* % 91.61% 10 Year % 96.87% 5 Year 82.45% 72.95% 3 Year 43.42% 39.82% 1 Year 0.79% 1.78% Compound Annual Growth Rate SHRPXTR Index S&P 500 TR Index Since Inception* 10.68% 4.08% 10 Year 9.69% 7.01% 5 Year 12.78% 11.58% 3 Year 12.77% 11.82% 1 Year 0.79% 1.78% Source: S-Network, as of 3/31/2016 *From 12/31/

15 Statistical Profile III Annualized Standard Deviation (Monthly) SHRPXTR Index S&P 500 TR Index Since Inception* 15.07% 15.16% 10 Year 14.97% 15.28% 5 Year 10.36% 12.22% 3 Year 9.64% 11.36% 1 Year 12.23% 14.66% Sharpe Ratio (Monthly) SHRPXTR Index S&P 500 TR Index Since Inception* Year Year Year Year Source: S-Network, as of 3/31/2016 *From 12/31/

16 Statistical Profile IV Information Ratio (vs. S&P 500 TR, Monthly) SHRPXTR Index Since Inception* Year Year Year Year Jensen s Alpha (vs. S&P 500 TR, Monthly) SHRPXTR Index Since Inception* 0.40% 10 Year 0.18% 5 Year 0.18% 3 Year 0.16% 1 Year -0.09% Source: S-Network, as of 3/31/2016 *From 12/31/

17 Statistical Profile V Correlation (vs. S&P 500 TR, Monthly) SHRPXTR Index Since Inception* Year Year Year Year R-Squared (vs. S&P 500 TR, Monthly) SHRPXTR Index Since Inception* Year Year Year Year Source: S-Network, as of 3/31/2016 *From 12/31/

18 Statistical Profile VI Beta (vs. S&P 500 TR, Monthly) SHRPXTR Index Since Inception* Year Year Year Year Outperformance (vs. S&P 500 TR) SHRPXTR Index Since Inception* % 10 Year 55.30% 5 Year 9.50% 3 Year 3.60% 1 Year -0.99% Source: S-Network, as of 3/31/2016 *From 12/31/

19 Index Construction

20 Index Construction Methodology All Constituents of SHRPX Must Be Constituents of the S&P 500 Selection Criteria for S&P 500 Include Requirements for: Sector Inclusion Primary Exchange Listing Minimum Market Capitalization Minimum Average Daily Trading Volume Other Factors Individual Securities Included in SHRPX Selected Based on Ranking system Within Each Sector Selects the Five Stocks in Each Sector with Highest Sharpe Ratios as of the Last Trading Day in November Sharpe Ratio is computed based on the 3-month average stock outperformance of the risk free rate divided by the 3-month daily standard deviation of the stock price The S-Network Large Cap Sharpe Ratio Index Uses A Stable and Transparent Construction Methodology. 20

21 Index Construction Weighting and Deletions Share Weights Based on Prices as of Close of Trading on Second Friday of Rebalancing Month Index Is Rebalanced Quarterly on the Third Friday of the Last Month of Each Calendar Quarter Index Is Rebalanced Quarterly Back to Equal Weights Stocks That Are Deleted From of S&P 500 Are Deleted from SHRPX Effective Upon Deletion from S&P 500 If Fewer Than Five Eligible Securities are Represented in any GICS Sector as of Snapshot Date Only Those Securities Which Qualify are Included 21

22 Index Details & Data Distribution Index Values Distributed in Real Time (15 second snapshots) in USD and EUR Total Return Index Calculated Daily in USD and EUR Index Values Distributed via Consolidated Tape Comprehensive Historic Data (including simulated back-tests from 12/31/1999) Daily Prices for Price-Only + TR Indexes in USD + EURO Quarterly Portfolio Snapshots (Historic Constituents and Weights) Extensive Analytic support Quarterly Reports ( Index Insights ) Industry Overviews Extensive Statistical Data Broad data distribution via third party vendors S&P/Bloomberg/Yahoo, etc. S-Network contribution page on Bloomberg: SNET 22

23 Company History Standard & Poor s Custom Index Group S&P Indices recognizes that no single index meets the needs of all investors. A custom index calculated by S&P Indices enables our clients either to refine existing S&P indices to reflect tailored measurements of market performance, or to create a unique index as the basis for a new derivative investment product. Drawing on this expertise and a global database of over 17,000 individual stocks, the S&P Custom Index Group provides an independent, flexible and accurate service enabling clients to purposefully design a Custom Index to meet their specific requirements. S-Network Global Indexes S-Network Global Indexes, Inc. (SNGI) is a publisher and developer of proprietary and custom indexes. Founded in 2005, SNGI publishes over 200 indexes, which provide the foundations for ETFs and other financial products with approximately $4 billion in assets under management. Key clients in this capacity include some of the world s leading providers of ETFs, UIT, Structured Products and SMAs. SNGI is an industry leader in the development of smart beta indexes, which isolate key investment factors to produce indexes with unique performance characteristics. The firm is also a leader in sustainable and impact investing, its most recent accomplishment being the development and maintenance of the Thomson Reuters Corporate Responsibility Ratings and Indexes, which create new common denominators for environmental, social, and governance benchmarking. SNGI produces several important Impact Indexes, including the S-Network Global Water Indexes and the Ardour Global Alternative Energy Indexes, which have been continuously published longer than any other indexes of their type. 23