Fair Cost Index

OUR SOLUTION

For far too long, asset managers had no other option than to accept higher fees and restrictive data policies from dominant index providers. Those same Asset Managers asked us to develop an alternative index, convinced that our 25 years’ experience in building robust risk-optimized portfolios would make us a legitimate and much needed new index provider.

So, we took up the challenge and launched a project. Our goal was to create an indexing product that would be perfectly substitutable and available at fair cost, with no limitations on usage and no risk of future price increases. With the support of major market players, such as Amundi, Natixis and AXA, we conducted comprehensive back-tests on a large variety of alternative indexes, using the APT model.

The results clearly showed that our indexes provide unbiased market replication. They are effectively substitutable on all criteria: from geographies and sectors to economic indicators, styles, performances, and delivery conditions.

The Fair Cost Index, FCI,
a new ground-breaking index was born.

With FCI, asset managers have access to daily compositions and index values for all purposes with no usage restrictions (e.g., risk analysis, performance attribution, reporting, marketing) and with a long-term commitment to keep price increases below inflation.

Contrary to traditional index providers, FCI’s fees are based on the aggregated assets under management across an entire company or group. Switching to FCI, therefore, represents a substantial cost saving for clients.

FCI is fully operational and can be installed overnight. Users can run it in parallel to their current indexes and switch to it at any time with complete safety.

FCI has designed a simple and transparent methodology to build robust indexes:

FCI Optimizing process is conceived to integrate, beyond the mere maximum number of equities limitation, ad hoc preferences such as SRI, ESG.

The FCI approach is either classical or personalised to fit with the user’s requirements. Consequently it gives the opportunity to elaborate
a customised solution at a fair cost, thanks to its power.

From the Entire Global Equity Market, FCI applies criteria such as geography, sector/industry and capitalization size as FILTER 1 to extract the
Raw Market that the Index represents.

This Raw Market is then filtered twice to define:

  • the Investable Market that the Index mimics
  • the Optimizable Market, a subset of the equities considered relevant in terms of liquidity and R2 level, from which the optimizer constructs the
    Index with an APT risk profile as close as possible to the Investable Market with the lowest ex ante Tracking Error.

FCI offer many advantages:

  • FCI is registered by ESMA as an Index Administrator.
  • FCI is regulated by the Benchmark European Directive.
  • FCI is certified by the AMF.
  • Strict Index Neutrality.
  • The Methodology has been tested in real conditions for several years with the help of major Asset Managers.
  • The approach adopted is to mimic a predefined Investable Market, with a transparent building process with no bias.
  • The Methodology is transparent for users without conflicts of interest and guarantees the strict neutrality of the indexes calculated.
  • Fair Cost.
  • Substantial savings. FCI fees are based on assets under management aggregated across the client’s company or group and not by entity,
    which represents substantial savings.
  • No usage restrictions.
  • FCI provides clients with index values and daily compositions, which can be used without restriction or additional fees for risk analysis,
    performance attribution, reporting, marketing and other functions.
  • Flexible Service.
  • Beyond classical offer, FCI proposes tailor-made indexes optimized to fit dedicated needs.
Download our fully detailed brochure here >>>