Following demand from its European clients, index provider MSCI has launched a new methodology which applies UCITS rules to equity indices.
The new methodology – the 10/40 Equity Index Methodology – applies the diversification of the European UCITS directive to MSCI equity indices.
“A significant number of our European clients expressed an interest in equity benchmarks that follow the UCITS rules,” said Henry Fernandez, president and CEO of MSCI. “After extensive client consultations, we have developed a proprietary index methodology that reflects the UCITS rules in the index, while keeping the index turnover at reasonable levels, both key issues for asset owners and managers.”
Under the UCITS directive, the maximum weight of securities of a single issuer cannot exceed 10% of the market value of a UCITS, and the sum of the weights of all issuers representing more than 5% of the market value of a UCITS cannot collectively exceed 40%. At the moment, although funds have to comply with the UCITS directive, their benchmarks do not usually reflect these constraints.
Now, says MSCI, 10/40 Equity Indices can be calculated on MSCI’s regional, country, sector, value, growth and small cap indices.