IndexIQ

Alternatively Weighted Indexes

IndexIQ's flagship alternatively weighed indexes combine the benefits of traditional indexing (e.g. low costs, low turnover and tax efficiencies) with the alpha potential sought by active managers. Unlike traditional indexes, this suite of IndexIQ products does not select or weight securities by their size, as measured by market capitalization, but instead relies on other factors that are important drivers of corporate success. Using economic or financial measures of performance, rather than simply market prices, to select and weight stocks has proven to provide performance advantages over traditional market capitalization indexing.

For instance, IndexIQ's flagship alternatively weighed indexes are designed to solve for the structural performance drag inherent in traditional indexes. The lag in performance occurs because a market cap weighted index overweights companies whose stock prices already have appreciated, while under-weighting companies whose stock prices have not; thus, market cap weighted indexes effectively result in "buying high and selling low." Additionally, market cap weighted indexes do not accurately reflect the economic footprint of a company or its relative importance to the economy.

IndexIQ uses a patent-pending, multi-factor construction model to select and weight index components to more accurately reflect their relative importance in the economy and avoid the significant value bias inherent in other alternatively weighted index strategies. While employing financial and economic measures of performance, rather than only market prices, to select and weight stocks has proven to provide performance advantages over traditional indexing, IndexIQ's alternatively weighted indexes take this concept to the next level by avoiding the value bias and providing additional style tilts suited to different investor needs, including the market's first alternatively weighted growth-oriented indexes.