Long-term thinking could become focus for a new index fund

Tue Mar 22, 2016 2:01pm EDT
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By Trevor Hunnicutt

NEW YORK, March 22 (Reuters) - S&P Dow Jones Indices is negotiating with asset managers to license its new index, which it says represents companies that focus on the long term rather than the current quarter.

The Long-Term Value Creation Global Index could be the basis for one or more mutual funds, exchange-traded funds or structured products, Vinit Srivastava, S&P's senior director of equity strategy, said in an interview last week.

S&P created the index over the past year in response to concerns that company executives, under pressure from hard-charging board overseers and the earnings calendar, have put short-term wins ahead of building businesses that thrive over time.

Designed with the help of the Canada Pension Plan Investment Board, the index consists of companies with what S&P considers strong corporate-governance plans and solid financial numbers.

"We have to do things to stop that short-term focus," said Poul Winslow, managing director at Toronto-based CPPIB. He said the index relied on a scoring system that draws out important details about how companies are governed.

The CPPIB and other institutional investors have committed $2 billion to private funds tracking the index.

S&P, a unit of McGraw Hill Financial Inc and the largest provider of indexes tracked by U.S.-listed ETFs, has not decided whether such a license would be exclusive to one asset manager.

Srivastava declined to name any bidders or comment further on the discussions. Bringing such a product to market could take several months of planning and regulatory approvals.   Continued...