S&P introduces S&P/TSX 60 130/30 Strategy long/short index in Canada

By Susanna Moon

Chicago, Jan. 19 - Standard & Poor's said it launched the S&P/TSX 60 130/30 Strategy index in Canada.

The index gives more weight to top performing constituents and less weight to the weakest performing stocks, using the S&P/TSX 60 as a foundation.

To determine overweight and underweight positions, S&P said it uses a transparent, rules-driven framework leveraging quantitative and qualitative factors, including capitalization rate, earnings quality and equity analyst recommendations, and divides the index into two baskets.

S&P said it boosts constituents of the overweight basket by 3% relative to the S&P/TSX 60, while it cuts stocks in the underweight basket by 3%. The index is rebalanced quarterly to minimize turnover and volatility.

The index provides the prospect of outperformance compared with traditional equity indexes that only passively monitor market performance, according to a company press release.

The index company also said it licensed AlphaPro Management Inc. to create and launch an exchange-traded fund based on the S&P/TSX 60 130/30.

"As Canadians and investors around the world face a new financial reality in 2010, the appetite for efficient exposure to a strategic index approach grows," Srikant Dash, head of global research and design at S&P, said in the release.

"The introduction of the S&P/TSX 60 130/30, S&P Indices' first index of its kind for the Canadian market, provides risk-controlled, long/short exposure in a transparent, cost-efficient format."

S&P also offers other strategy indexes such as the S&P 500 130/30 Strategy index, S&P 500 Risk Control indexes and S&P 500 VIX Futures index series.

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