SHILLER BARCLAYS
IDENTIFYING VALUE & REDUCING RISK
The Shiller Barclays CAPE® US Sector Risk Controlled 10% USD Total Return Index (the Index) is a rules-based equity index. A rules-based approach removes emotions, decisions and the need to time the market. The Index applies well-established principles for asset selection and allocation with a goal of providing positive long-term returns.
Each month, a defined set of rules is used to invest in four market sectors of the U.S. economy. Each day, the Index has the ability to allocate a portion to cash and a portion to the Shiller Barclays CAPE® US Sector Total Return Index based on the demonstrated stability of the equity market to help reduce potential risk and increase potential long-term returns. Two core principles are applied for sector selection and allocation:
The CAPE® ratio is a tool developed by Professor Shiller to identify assets that appear to be undervalued. The CAPE® ratio compares the current price to the average earnings over 10 years, adjusting for inflation. A lower CAPE® ratio is considered to be an indicator that an asset is undervalued. The Shiller Barclays CAPE® US Sector Total Return Index relies on a modified version of the classic CAPE® ratio called the Relative CAPE® Indicator.
KEY
TERM
CAPE® RATIO — A statistical tool used to identify potential values, the CAPE® Ratio compares the current price to the average earnings over 10 years, adjusted for inflation.
Frequently Asked Questions
What is the Shiller Barclays Index?
It’s the Shiller Barclays CAPE® US Sector Risk Controlled 10% USD Total Return Index — a rules-based equity index designed to identify undervalued sectors and manage risk.
What is the CAPE® ratio?
The CAPE® ratio, developed by Professor Shiller, compares an asset’s current price to its average earnings over 10 years, adjusted for inflation. A lower ratio can indicate an asset is undervalued.
How does the Index select investments?
Each month, a defined set of rules selects investments across four U.S. market sectors, and the Index can shift a portion of allocation to cash daily based on market stability.
Why use a rules-based approach instead of active management?
A rules-based approach is designed to remove emotional decision-making and the need to time the market from the investment process.
What does “risk controlled” mean in the Index name?
It reflects the Index’s use of a modified CAPE® approach — the Relative CAPE® Indicator — combined with rules for allocating between equities and cash to help manage risk.
Where can I get more information?
Download the brochure or white paper, or contact Alpha K2 to discuss whether this fits your investment goals.