Research Affiliates, Ryan ALM launch RAFI U.S. Corporate Bond indexes

By Jennifer Chiou

New York, Feb. 10 - Research Affiliates, LLC and Ryan ALM, Inc. announced the launch of the RAFI U.S. Corporate Bond Index series for Investment-Grade and High-Yield.

According to a Research Affiliates release, this series of investable, broad market indexes is the first to apply the Research Affiliates Fundamental Index methodology for the creation and calculation of bond indexes.

The launch is effective as of Jan. 1.

The release stated that the Fundamental Index methodology has received numerous awards for innovation and index provider of the year, adding that there are now more than 100 equity indexes available through the FTSE RAFI Index series.

The RAFI U.S. Corporate Bond indexes start with a universe of 5,000 issues that are then given fundamental weights, according to Research Affiliates.

Ryan ALM then selects issues that qualify under the index rules. A unique feature of the index rules is the creation of three maturity cells: one to five years, five to 10 years and 10 years and beyond.

Each index only selects the single bond with the highest amount outstanding per issuer per maturity cell, the release said. For example, the one to 30-plus year index series would have three maturity cells allowing for three issues of the same issuer if they qualify under the index rules.

This ensures the greatest liquidity for each index such that investors can actually buy and duplicate the index portfolios, the release said.

The indexes in the series include the:

• RAFI U.S. Investment-Grade Corporate Master Index;

• RAFI U.S. Investment-Grade Corporate Bond Index, 1-5 year;

• RAFI U.S. Investment-Grade Corporate Bond Index, 1-10 year;

• RAFI U.S. Investment-Grade Corporate Bond Index, 10 year +;

• RAFI U.S. Investment-Grade Corporate Bond Index, 1-30 year;

• RAFI U.S. High-Yield Bond Master Index;

• RAFI U.S. High-Yield Bond Index, 1-5 year;

• RAFI U.S. High-Yield Bond Index, 1-10 year; and

• RAFI U.S. High-Yield Bond Index, 1-30 year.

The release said that the index rules include a figure of $500 million as generally the largest issue picked per issuer per maturity cell for investment grade and $350 million for high yield.

Based in Newport Beach, Calif., Research Affiliates is focused on investing and asset allocation strategies. New York-based Ryan ALM is both a bond index provider and bond asset management firm.

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