Where have you heard about strategy indices?

What are strategy indices?

They are indices that are based upon a specified trading strategy. Just as other indices track the performance of a particular sector or market, a strategy index will measure the results of a particular trading strategy.

Asset managers issue them, as do some index providers such as Euronext and S&P Dow Jones. As an investor, your attention may have been drawn to strategy indices by your financial adviser.

What you need to know about strategy indices.

Strategy indices use 'quantitative' investment strategies, meaning they are based on mathematical formulae and leave little or no room for discretion by a fund manager. They are thus the opposite of 'qualitative' strategies, which depend on human judgement. The strategies concerned may refer to currencies, commodities, shares, bonds or interest rates.

All strategies are very dependent on market conditions and investors need to be experienced enough to decide on the strategy that suits their risk profile , and look carefully at the criteria that is followed in the construction of the index.