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Index White Paper

This white paper examines the performance of several U.S. equity indexes, created using EIA's Invest with the Fed methodology, for the 39-year period from 1979 through 2017.

White Paper Synopsis

 

The IFED strategy extends traditional smart beta and factor-based products to create dynamic indexes that adjust when economic conditions warrant. We use Fed policy signals as the IFED reallocation indicator and rely on twelve firm financial metrics to determine the optimal equities in which to shift the underlying portfolio. The twelve metrics are used to identify firms that prosper under each alternative monetary environment. When the IFED indicator signals a shift in policy, the portfolio is reallocated to equities with features that are conducive to the new policy. Over the 39 years, our All-Cap Index earns an annual return of 19.18% versus 12.52% for the Wilshire 5000; further, both indexes experience similar volatility. Consistent with the penchant for small firms to have greater sensitivity to monetary conditions, our Small-Cap Index performs considerably better. Specifically, over the same period, our Small-Cap Index returns 20.25% versus 13.07% for the Russell 2000, and further, our Small-Cap Index subjects investors to less risk. 

IFED Index Strategy & Performance

November 2018