Citi RAFI Bond Index Series
Citi Fixed Income Indices (Citi) and Research Affiliates have developed a new series of investable bond indices based on the Research Affiliates Fundamental Index* (RAFI*) methodology.
The Citi RAFI Bond Index Series will include sovereign and corporate bond indices and uses fundamental measures to weight the index components.
The Citi RAFI Bond Index Series weights index components by the issuer's economic footprint and proxies for ability to service debt. This provides an alternative to market capitalization weighting, where index components are weighted by the issuer's amount of outstanding debt.
A Strategic Partnership
Citi brings its expertise and experience in fixed income index related products and services to provide stable and replicable indices.
Research Affiliates brings its research strength, product development capabilities and pioneering proprietary methodology on securities selection and weighting based on fundamental measures.
The Citi RAFI Bond Index Series is available in The Yield Book, Citi's web-based analytical tool that enables clients to manage their portfolios against various indices, analyze portfolio positions, quantify risk and identify drivers of performance.
* Please see important information at the bottom of this page.
The Citi RAFI Bond Index Series will include:
Bond Index Series Sovereign Emerging Markets
Local Currency Bond Index Series Corporate Bond
Index Series
Research Affiliates' Innovative Fundamental Index Methodology
An alternative approach to securities weighting
Traditional fixed income indices use market capitalization weights which tend to increase exposure to issuers as they become more indebted.
Research Affiliates has developed an innovative methodology for constructing indices which determines component weightings based on fundamental measures.
The essence of this approach is to focus on capturing the economic "footprint" of a sovereign or company, which reflects its ability to service its debt.
Simultaneously, Research Affiliates Fundamental Index methodology preserves the advantages of passive investing:
- Diversification
- Liquidity
- Transparency
- Broad economic representation
- Limited transaction costs
Sovereign index methodology
Holdings are weighted based on metrics that signify the importance of a country in the world economy:
Population | GDP | Energy consumption | Rescaled land area
Corporate index methodology
Holdings are weighted based on four measures of a company's size: Sales | Cash flow | Book value of assets | Dividends
Note that the Fundamental Index factors:
- are not correlated, or have very low correlation, with market value
- are not affected by investor behavior
- reflect objective measures of relative size
An approach for an inefficient market
Research Affiliates believes that markets are not perfectly efficient and that this inefficiency is particularly evident in the sovereign debt markets.
Why should we deliberately choose to lend more to those who are most deeply in debt?
Weighting countries based on their economic fundamentals instead of their outstanding debt moderates exposure to more indebted countries.
Citi's Expertise in Index Design and Production
A recognized fixed income index provider with more than 30 years of experience
Experience in Indexing
Citi has been producing fixed income indices for more than 30 years. Citi's indices have been widely used in ETFs, structured products and swaps.
Desirable Index Qualities
Indices are based on objective rules and strike a balance between comprehensiveness and replicability. They are designed to facilitate replicating portfolios and to minimize tracking error.
Coverage
Citi indices offer a broad array of currencies, regions, asset classes and credit qualities.
Fixed Income Analytics
All Citi indices are available in The Yield Book, Citi's portfolio analytics system for index analysis and risk management.
Accessibility
For more information about the Citi RAFI Bond Index Series, please go to:
- Citi Fixed Income Index website: www.yieldbook.com
- Research Affiliates website: www.researchaffiliates.com
- The Yield Book
- Bloomberg:
- CRFDMU - Citi RAFI Sovereign Developed Markets Bond Index Master in USD terms
- CRFDU - Citi RAFI Sovereign Developed Markets Bond Index Liquid in USD terms
- CRFELMU - Citi RAFI Sovereign Emerging Markets Local Currency Bond Index Master in USD terms
- CRFEMLU - Citi RAFI Sovereign Emerging Markets Local Currency Bond Index Liquid in USD terms
Citi, the leading global fi nancial services company, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citi provides consumers, corporations, governments and institutions with a broad range of fi nancial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.
Research Affiliates, a global leader in innovative investing and asset allocation strategies, operates worldwide from its base in Newport Beach, California. Dedicated to solving complex investment issues, the firm creates innovative strategies that respond to the current needs of the market. Leveraging its strong research focus, Research Affiliates distributes products in partnership with some of the world's leading financial institutions. These affiliations take the form of direct asset management, sub-advisory services, and licensing agreements.
Citigroup Index LLC, a subsidiary of Citigroup, and Research Affiliates, LLC have agreed to jointly create and distribute investable fixed income indexes (the "Citi RAFI Bond Index Series") based on the Research Affiliates' patented Fundamental Index methodology. All intellectual property, including trademarks, contributed by Research Affiliates, LLC and Citigroup Index LLC shall remain solely vested with the respective contributor. Neither Citigroup Index LLC nor Research Affiliates, LLC make any warranties, express or implied, to any of their customers nor anyone else regarding the accuracy or completeness of any data related to the Citi RAFI Bond Index Series. All information is provided for information purposes only. Neither Citigroup Index LLC nor Research Affiliates, LLC accept any liability for any errors or any loss arising from the use of information in this publication.
Citi and Citi and Arc Design are trademarks and service marks of Citigroup Inc. or its affiliates and are used and registered throughout the world. The Yield Book is a registered service mark of The Yield Book Inc. in the U.S. and other countries. The trade names RAFI®, the RAFI logo, and the Research Affiliates corporate name and logo are registered trademarks and are the exclusive property of Research Affiliates, LLC.
The trade names Fundamental Index®, RAFI®, the RAFI logo, and the Research Affiliates corporate name and logo are the exclusive intellectual property of Research Affiliates, LLC and are registered trademarks in the United States and other countries. Any use of these trade names and logos without the prior written permission of Research Affiliates, LLC is expressly prohibited and Research Affiliates, LLC reserves the right to take any and all necessary action to preserve all of its rights, title and interest in and to these marks. Fundamental Index®, the non-capitalization method for creating and weighting of an index of securities, is patented and patent-pending proprietary intellectual property of Research Affiliates, LLC (US Patent No. 7,620,577; 7,747,502; 7,792,719; 7,778,905; and 8,005,740; Patent Pending Publ. Nos. US-2007-0055598-A1, US-2008-0288416-A1, US-2010-0191628, US-2010-0262563, WO 2005/076812, WO 2007/078399 A2, WO 2008/118372, EPN 1733352, and HK1099110).
©2012, Citigroup Index LLC. All rights reserved. Duplication and dissemination prohibited without prior written permission. ©2012, Research Affiliates, LLC. All rights reserved. Duplication and dissemination prohibited without prior written permission.