Russell Investments has introduced a series of indexes designed to allow fund managers to control volatility in their portfolios.
The indexes will allow managers to control their volatility by setting parameters to an algorithm which will shift the assets in a portfolio between two benchmarks, an underlying index and a cash investment, depending on how much volatility it calculates in the securities index. The proportion of the volatility control index allocated to the underlying index and cash investment is determined by the index’s algorithm imbedded in the methodology. The allocation will depend on the index’s target volatility and the observed volatility of the underlying index.
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