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S&P MAESTRO 5 Index: A Sophisticated Composition Designed to Simplify Risk Management - YouTube
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a virtuoso can deliver a memorable
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performance on one instrument but it
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takes a maestro to conduct multiple
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instruments to their optimal performance
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potential that's why s p dow jones
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indices compose the s p maestro 5 index
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the s p multi asset equal risk factor
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contribution index or s p maestro 5
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is a diversified multi-asset and
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multi-factor risk parity strategy
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designed to help investors hit the right
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notes across a range of market
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conditions
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the instruments inside the s p maestro 5
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index work in concert
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guided by a rules-based dynamic
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methodology that's designed to allocate
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risk equally between its diverse mix of
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equities
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fixed income and commodities
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while providing an additional layer of
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protection through an allocation to
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vic's futures
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beginning with equities the s p maestro
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5 features four s p 500 factors
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quality
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momentum
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low volatility and dividends
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factors also called risk premia are
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characteristics that influence an
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equities risk in return since individual
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factor outperformance can shift as
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market conditions change we use a
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combination of factors to increase
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diversification and potential upside
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the commodity piece of the s p maestro 5
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is gold
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we use the precious metal because it
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offers an inflation hedge while also
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helping the index stay a step ahead of
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any potential dips in the equity market
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the fixed income section of the s p
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maestro 5
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is made up of 5 and 10-year u.s
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treasuries because these are the bonds
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that investors often look to as a steady
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source of income
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the index allocates risk equally among
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its components
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in order to protect against volatility
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when risk goes up for one piece of the
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index
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the s p maestro 5 dynamically adjusts
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its component weights
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generally tilting to less volatile
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assets in order to optimize risk in
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return
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to ensure the index maintains its target
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volatility of 5
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and its potential to outperform
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a leveraged position of up to 150
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percent
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can be taken daily on the total index
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exposure
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a vix overlay provides an additional
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layer of volatility and downside
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protection for the index
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vix sometimes referred to as wall
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street's fear gauge is used by investors
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to measure the level of risk when making
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investment decisions
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the s p maestro 5
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uses a mix of s p 500 vic short
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and mid-term futures to respond to risk
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signals from the vix curve
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on a daily basis the s p maestro 5
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assesses those signals
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when the curve is concave there is no
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allocation to the s p 500 vic short term
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futures index but when the curve is
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convex signaling distress in the market
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could be imminent a five percent
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allocation to s p 500 vic short-term
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futures
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is triggered
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and can remain for up to 30 days
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as a base protection against downturns
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and volatility spikes the index also
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uses a two percent allocation to s p 500
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vix midterm futures
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rebalanced on a monthly basis to help
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maintain its protection
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against future risks so what's the end
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result of the s p maestro 5's dynamic
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approach to risk and return
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a multi-factor multi-asset index that
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dynamically responds to changing market
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conditions and provides
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greater upside potential
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diversification
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downside protection
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volatility reduction
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inflation protection
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and rising rate protection
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to learn more about the s p maestro 5
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index
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and to explore the composition of this
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innovative risk management tool
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visit us at www.spglobal.com
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spdji
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you
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