Introducing MSCI Risk Control Indices

In the aftermath of the global financial crisis, many new equity index methodologies are emerging that aim to manage risk. The MSCI Risk Control Indices aim to reflect the performance of a managed volatility equity strategy with potentially lower tail risk.

Each MSCI Risk Control Index seeks to replicate a strategy that targets a specific level of risk (10%, 12.5%, 15%, or 17.5%) by dynamically varying the weights of an underlying MSCI parent index and a cash component. The weight of the underlying MSCI parent index is determined by its realized volatility. If the volatility of this underlying index is higher than the target risk level, the weight of the index is reduced; if the volatility is lower than the target risk level, the weight of the index is increased using leverage (with a maximum of 150%). This fluctuating process keeps the index close to the target volatility. 

Agenda Topics Include:

• MSCI Risk Control Indices--An Overview

• Methodology

• Performance Characteristics

• Applications for MSCI Risk Control Indices