Designed to help investors build long-term shareholder value by owning the best compounders of growth in the world
Our Indexes are designed to help investors capture the long-term shareholder returns of the most successful and most consistent growth companies in the world. And while such companies—which we call growth compounders—are the primary drivers of long-term shareholder returns, the price you pay for their shares matters. We believe therefore that any successful capital appreciation solution should start with a bottom-up approach that straddles growth and value, while never losing sight of quality, in order to identify the sources of long-term shareholder value creation in any market, country or region of the world.
Our process starts with the collection and screening of the financial statements of all publicly traded global companies with reliable and consistent reports. MarketGrader screens through millions of data records to identify reporting anomalies and inconsistencies and filters out those it deems unreliable. Once all companies are filtered, the data in their financial statements, along with historical stock prices, form the foundation of our analysis and our company ratings.
Next, we calculate a series of metrics across companies of all sizes and in all sectors that we believe are critical to identify sustainable growth compounders. These metrics seek to find companies with characteristics that include consistent bottom to top line growth—not just explosive short-term growth—with sustainable margins and high cash flow generation; a sound capital structure that doesn't impair operating growth, combined with high returns on invested capital and low capital intensity; and reasonable valuations relative to sustainable growth rates.
Next, we aggregate all these data points into 24 individually graded indicators, which we classify into four categories of our analysis: Growth, Value, Profitability and Cash Flow. Since business models vary greatly across industries and sectors and between companies of very different scale, our indicators also vary to account for such differences.
We then aggregate all 24 indicators into a final MarketGrader Score and Rating. This allows us to apply a standardized global rating methodology to companies in diverse industries and of different sizes. These scores are the building blocks of our Indexes, as all constituents are selected on the basis of their MarketGrader Score, once they pass all other index-specific rules and filters.
We start by taking a broad look at any particular market, country or region in order to identify its investable universe. This requires a close look at each market's liquidity, size breakdown and local restrictions on the ownership of shares by foreign investors.
Based on each market's unique characteristics, we then define each Index's methodology in order to arrive at an optimal exposure. This includes constituent count, liquidity and size restrictions, caps on sector exposures, weighting scheme, rebalance schedule and any market-specific rules that ensure the resulting index is fully investable, replicable, transparent and efficient.
