Global index provider, S&P Dow Jones, has announced the launch of its new Global SmallCap Index series, which has been designed to improve long-term risk adjusted performance of small caps, it says.
The new index series would aim to mitigate risks in global small-caps by excluding companies without a consistent track record of positive earnings.
It would include the following regional indices:
- S&P Global SmallCap select
- S&P Global ex-US SmallCap Select
- S&P Developed ex-US SmallCap Select
- S&P Emerging SmallCap Select
- S&P/ASX Small Ordinaries Select
The companies that want to be included in any of these indexes would be required to post at least two consecutive years of positive earnings per share.
The new indices, which would be rebalanced semi-annually, would be based on the methodology that excluded the smallest and least liquid 20 per cent of companies within each country, except for the S&P/ASX Small Ordinaries Select, by their float market caps and median daily values traded.
Senior director for global equity indices at S&P Dow Jones Indices, Michael Orzano, said that indices that incorporated earnings eligibility criteria, such as the S&P SmallCap 600, have outperformed other small-cap benchmarks over the long-run.
“Focusing on companies that have generated positive earnings has historically provided better long-term total returns with less volatility in global small-caps,” he said.