Method for Creating Factor Indexes and Long/Short Index Products With Systematic Risk Management

摘要

An investment method and process used to create investment indexes that measure the difference between market segments, which such market segments may be in unrelated investment categories or within the same asset class, while simultaneously managing long/short portfolios that return the measured difference in the form of investible index products is disclosed. The three primary steps of the inventive investment method and process are: (1) to identify the desired risk factor for isolation for purposes of hedging existing risk, diversifying risk, or tactical investment in risk; (2) to create and calculate a Factor Index and develop underlying algorithms for intraday and end-of-period benchmarking; and (3) to design a Factor Index Product and implement a Factor Portfolio involving the isolation of the desired risk factor by establishing and maintaining a long exposure to one (or more) market segment(s) and a short exposure to one (or more) market segment(s).