INDEX FUND MANAGEMENT

OUR CORE DNA

Index investing is considered an efficient and cost effective method for broad or targeted exposures to domestic and international markets.   With thousands of options to choose from institutional customers can construct a nearly unlimited number of strategies to gain global multi-asset class exposure.   Further, investment management fees and trading costs can erode portfolio returns. However, the low fees of index fund management and limited turnover of indexes allow index funds to be extremely cost effective.

Partnering with Penserra gives our clients access to a wide range of index products managed by a team of experienced investment professionals.  The DNA of our firm originated from Barclays Global Investors, now part of BlackRock.  Our experience managing index funds is at our core having spanned three decades with a focus on low tracking error, low turnover, risk management, and a level of client service that is second to none.

 

EXPERIENCE AND TECHNOLOGY

Each of our index funds is managed using a team based approach.  The portfolio managers are supported by experienced operations specialist and global traders that work around the clock to cover more than forty five developed and emerging markets.   Our technology and infrastructure provide us with the capabilities to evaluate benchmark risk, transaction costs, and construct optimized solutions when index funds are not fully replicating.  In addition, each month we evaluate every trade through our Best Execution Committee and the performance of every index fund is evaluated as part of our Investment Review Committee.

Our expertise extends beyond portfolio management into global equity trading.  In order to perform well versus a benchmark you must have the capabilities to implement portfolios and index reconstitution in a way that reduces negative performance impact.  Our global equity trading team uses state of the art technology to access liquidity from exchanges and other trading venues around the world.  We have integrated technology that seamless allows for the routing of orders from portfolio managers to the equity traders, electronic connectivity to trading venues around the globe, and the receipt of order executions as they occur in real-time.

 

HOW WE TRACK THE BENCHMARK

We track portfolio benchmarks first and foremost by being prepared and diligent.  What that means to us is a sound understanding of our client expectations, index methodologies, market nuances, implementation issues, and thorough ex ante and ex post analysis.

  • Client Objectives and Constraints. We begin by creating and understanding the investment guidelines that will allow or constrain the decision we make in managing the portfolio relative to the benchmark choice.
  • Index Methodology and Announcements.   With the benchmark selected, we study the index methodology and index reconstitution time line.  In addition, we always make ourselves aware of upcoming index changes in order to be prepared to adjust our portfolio holdings to match the index.  This includes creating unique strategies around future index reconstitutions.
  • Market Nuances. Whether the benchmark covers the broad global markets, style bias, or market capitalization, our portfolio manager reviews each market to better understand the path ahead. 
  • Implementation. Although we can fully replicate any benchmark, in some cases because of size or investment constraints it may be necessary to create an optimized strategy.  We use optimization techniques, risk models, and trading penalties to create a portfolio that limits turnover and reduces tracking error based on model estimations.  Further, we run a detailed ex ante analysis across multiple scenarios to better understand the potential impact of portfolio changes.
  • Portfolio Maintenance.  Each day our portfolio managers evaluate shares outstanding, corporate actions, dividends, and M&A activity.  We research these items every day to make timely decisions that reduce tracking error. 
  • Ex Ante and Ex Post Analysis. In order to successfully reduce tracking error in a portfolio is essential to understand the impact of portfolio changes before (ex ante) they are made.  In addition, after (ex post) the new portfolio has been created one must thoroughly review the impact of the decisions. By being disciplined about ex ante and ex post analysis, we constantly improve our investment and decision making process.

Whether the desired fund structure is a separate account, mutual fund, or exchange traded fund, partner with Penserra for all of your index fund needs.

For more information, please contact us at 800-456-8850 or send us an email, indexfunds@penserra.com