IPOX Schuster LLC

IPOX Global Indexes

Unique Global Growth Indexes

Our underlying philosophy involves the classification of IPOs and spin-offs as a separate equity sector for a substantial period of time in aftermarket trading. Academic research shows that IPOs and spin-off possess unique return dynamics up to at least four years after “going public”. Some of the empirical features concern a highly skewed long-run return distribution with few companies driving outperformance, significant return differences in the cross-section of return when classifying IPOs into sub-groups of companies or the link between pre-IPO accrual management and the dynamics in short-and long-run IPO performance. The IPOX Indexes are designed to capture these return dynamics via a scaleable, sustainable, transparent and liquid index methodology.

The Series of IPOX Sub-Indexes is based on the IPOX Global Composite, an index which measures the after-market performance of the global IPO and spin-off sector. The 15 Sub-Indexes of the IPOX Global Composite Index typically capture the best performing, largest and most liquid members of the IPOX Global Composite Index.

The IPOX Global Composite Index

The IPOX Global Composite Index is a rules-based index and provides the basis for the various IPOX Sub-Indexes. It is a value-weighted all-cap momentum index that measures the performance of IPOs and spin-offs in calendar time. The IPOX Global Composite Index is dynamically reconstituted as IPOs enter the index at their 7th trading day and exit automatically 1000 trading days or approximately four years thereafter. Because IPO activity fluctuates over time, the number of securities in the IPOX Global Composite Index changes accordingly. The IPOX Global Composite Index encompasses the broad mix of global IPOs during the past four years, including large, more mature IPO companies, fast-growing and successful IPOs as well as IPOs underperforming the market. In order to be eligible for index membership, companies must meet minimum quantitative entrance requirements and must trade on the major stock exchanges. The IPOX Global Composite Index currently captures more than 2,300 companies with an underlying market capitalization exceeding USD 3.6 trillion and USD 1.4 trillion of free-float, underlying the significance of the global IPO market.

The IPOX Sub-Indexes: Economically Significant Sub-Groups

The IPOX-Sub Indexes (listed above, left) are applied capitalization-weighted indexes calculated in real-time. The IPOX Sub-Indexes are reconstituted quarterly in order to reflect changes in the underlying IPOX Global Composite Index and typically allow exposure into 45%- 85% of the market capitalization in the respective sub-universe of the IPOX Global Composite. They ensure that diversification requirements are met, the weighting of the largest index constituents is capped at 10% at the quarterly reconstitution event.

The IPOX Indexes: Designed for various Market Participants

The IPOX Indexes provide average, rather than median, exposure to the after-market performance of IPOs. This addresses the well-known skewness of the distribution of long-run IPO returns. The underlying and well-reported empirical features in IPOs make products benchmarked against the index interesting for a number of market participants with varying investment horizons, such as the retail buy-and-hold community and high-net worth individuals seeking average IPO exposure, arbitrageurs, traders or index spreaders.

The IPOX Indexes: A true reflection of ECM trends and the innovativeness of the global economy

The IPOX Indexes are a true reflection of ECM trends and the degree of innovativeness of the global economy. IPO activity has historically been closely associated with companies with higher risk-profiles. This has been particularly so in the late 1990s. In recent years, however, critical changes in the regulatory framework associated with Sarbanes-Oxley have contributed to a change in the profile of global IPOs which appear permanent. This is indicated by older and mature companies “going public” in diverse industry sectors. Similarly, privatization offerings in Europe and Asia have had a substantial impact on sector diversification of the global IPOX Indexes series.

THINK GROWTH—THINK IPOX

The IPOX Global Indexes are stated in the form of an index number which is relative to a base period market value. For each IPOX Index, Price and Total Return Indexes are calculated. The index methodology uniquely addresses the well-known skewness of long-run IPO returns, whereby relatively few companies drive the outperformance of the respective index. Please see the IPOX Indexes weekly update on our homepage for unmasked information about the benefits of using IPOX for global asset allocation.