FAQ: S&P Christian Values Screened Indices

Introducing the S&P/ASX 200 GARP Index

Demystifying Volatility-Controlled Indices

Effectively Measuring Mega Caps: The S&P 500 Top 50 Index

TalkingPoints: Why What's Under the Dividend and Factor Hood Matters

Education - Sep 09, 2025

FAQ: S&P Christian Values Screened Indices

Company Background

1. Who is S&P Dow Jones Indices? S&P Dow Jones Indices (S&P DJI) is the largest global resource for essential index-based concepts, data and research, and it is home to iconic financial market indicators, such as the S&P 500^® and the Dow Jones Industrial Average^®. More assets are invested in products based on our indices than products based on indices from any other provider in the world. Since Charles Dow invented the first index in 1884, S&P DJI has been innovating and developing indices across the spectrum of asset classes, helping to define the way investors measure and trade the markets.

2. Who is S&P Global Sustainable1? S&P Global Sustainable1 (S1) serves as the central source for sustainability intelligence from S&P Global. Through the Trucost Environmental data, S1 is a leader in carbon and environmental data and risk analysis and assesses risks relating to climate change, natural resource constraints and broader environmental, social and governance (ESG) factors.

3. Who is Bountiful Financial? Bountiful Financial is a pioneer in faith-based investing, and its mission is to democratize faith-based investing through indices. Bountiful Financial’s governance-driven investment frameworks empower investors to align indices and investments with the core beliefs and values of their faith, across diverse religious traditions such as Roman Catholic, Evangelical Christian and The Church of Jesus Christ of Latter-day Saints.

For information on Bountiful and its process, please refer to https://bountifulfinancial.com/.

The Bountiful Evangelical Christian Framework

4. Why does S&P Dow Jones Indices need a framework provider for a Christian values index? While S&P DJI offers values-based indices including the S&P Catholic Values Indices (using United States Conference of Catholic Bishops [USCCB] guidelines) and S&P Shariah Indices (based on Islamic canonical law), we recognize structural differences between Catholic and Evangelical frameworks. Catholics follow hierarchical governance with codified teachings, while Evangelicals emphasize the personal nature of their faith and scriptural authority leading to diverse interpretations and less centralized guidelines. This necessitates specialized expertise for accurate representation.

5. Why did S&P Dow Jones Indices choose to work with Bountiful Financial for a Christian values index? Bountiful's faith-specific investment frameworks provide practical approaches for aligning investments with faith convictions through widely accepted doctrines and religious principles vetted by faith communities. Its industry-leading methodology includes governed frameworks (thoroughly vetted by faith representatives) and curated frameworks (developed with subject matter experts). This consistent methodology enables broader adoption across varying faith traditions.

Bountiful’s governance framework and methodologies center on the semiannual meetings of its advisory councils, which provide a structured, ongoing mechanism for incorporating the lived experiences, moral reasoning and evolving theological insights of faith communities into index construction. This approach ensures that indices remain aligned with the authentic and current expressions of faith-based values.

For information on Bountiful and its process, please refer to https://bountifulfinancial.com/.

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Education - Aug 29, 2025

Introducing the S&P/ASX 200 GARP Index

Jason Ye

Senior Director, Factors and Dividends

S&P Dow Jones Indices

Introduction

In the papers Bridging Value and Growth: Designing a GARP Strategy for Australia and Introducing the S&P World Ex-Australia GARP Index, we documented the growth at a reasonable price (GARP) strategy’s effectiveness in markets outside of Australia. We also highlighted that, due to the unique nature of the Australian equity market, certain aspects of index construction may need to be modified to better fit local characteristics.

How does S&P DJI approach the GARP strategy within the Australian equity market?

In this paper, we introduce the S&P/ASX 200 GARP Index, an innovative index that applies the GARP framework to the S&P/ASX 200 universe. This index is built upon the well-established S&P GARP Index Series, focusing on growth opportunities while balancing valuation and quality considerations. The index methodology has also been adjusted to better align with the local market dynamics.

In this paper, we will delve into the index construction, historical performance and characteristics of the index to show how GARP works in Australia. This paper aims to provide insight into how an indexing approach can implement the GARP framework in a more localized manner.

Index Construction

On Aug. 9, 2024, S&P Dow Jones Indices (S&P DJI) launched the S&P/ASX 200 GARP Index. This index begins by selecting the top 150 stocks with the highest Growth Scores from the S&P/ASX 200. The Growth Score is a composite metric that combines three-year sales-per-share (SPS) growth with three-year earnings-per-share (EPS) growth.

From this pool of 150 stocks, the S&P/ASX 200 GARP Index subsequently selects the top 50 stocks based on the highest quality and value (QV) composite score. The QV composite score is derived from two key metrics that assess both quality and valuation: return on equity (ROE) and earnings-to-price ratio. ROE serves as a prominent metric for evaluating a company's quality, while the earnings-to-price ratio is widely recognized as a valuation metric.

The selected 50 stocks are then weighted according to the product of their float market capitalization (FMC) and QV composite score, subject to a 0.1% single-stock floor and a 10% single-stock cap. The index also incorporates a relative single GICS^® sector cap of no more than 10% above the corresponding GICS sector weight in the S&P/ASX 200. The index is rebalanced on a semiannual basis in June and December.

While the design of the S&P/ASX 200 GARP Index mirrors the framework of the broader GARP methodology, several adjustments have been made to better align with the characteristics of the Australian market.

Mild Selection on Growth Metrics: We exclude only the bottom 50 stocks with poor growth characteristics from the S&P/ASX 200 universe. Our previous paper, Bridging Value and Growth: Designing a GARP Strategy for Australia, indicated that when assigning stocks in the S&P/ASX 200 into quintile compositions, the results of the historical growth performance of both EPS and SPS are not monotonic. Additionally, the Australian equity market tends to be more cyclical than the U.S. equity market, with over 50% of the S&P/ASX 200 weight concentrated in Financials and Materials as of August 2025. A moderate screening of growth metrics can eliminate poor growth stocks while helping to smooth out some cyclical fluctuations in the underlying market.
Exclusion of Leverage Ratio: We have removed the leverage ratio from the calculation of the QV composite score. In Bridging Value and Growth: Designing a GARP Strategy for Australia, we discovered that the leverage ratio is not a suitable metric for the Australian market, which is heavily weighted toward Financials—particularly banks—which has accounted for more than 30% of the S&P/ASX 200 weight on average over the past decade.
Amplified Contribution from QV Composite Score: By selecting 50 stocks with high QV composite scores from the top 150 Growth Score-screened companies and weighting the constituents based on the product of their FMC and QV composite score, we enhance the index’s construction. Based on our research in Bridging Value and Growth: Designing a GARP Strategy for Australia, it seems that ROE and earnings-to-price ratios are effective metrics in the Australian market. Identifying companies with strong profitability and reasonable valuations within the growth universe is crucial for finding well-priced opportunities.
Capping Adjustments: The single-stock cap is set at 10%, and the GICS sector cap is established at a relative 10% against the S&P/ASX 200. This approach better reflects the characteristics of the S&P/ASX 200, which is a more concentrated index with fewer stocks compared to the S&P World Ex-Australia.

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Education - Aug 26, 2025

Demystifying Volatility-Controlled Indices

Sara Pollock

Director, Multi-Asset Indices

S&P Dow Jones Indices

Volatility-controlled indices (VCIs) are widely used crediting options within index-linked annuities and life insurance products. However, the nomenclature sounds more complex than what the indices aim to achieve.

Here we will demystify what VCIs are, their general mechanics and the potential benefits they provide to the insurance ecosystem.

Prior to discussing volatility-controlled indices, we first discuss market volatility. Volatility, also known as standard deviation, measures how far the value of the index moves from the average in general.

An index with a small standard deviation like 5% means that index value changes will generally be smaller than in indices with larger standard deviations like 15%. In a volatility-controlled framework, an index with a 5% volatility target is designed to experience smaller swings in values than an index with a 15% volatility target. This applies both on the upside and the downside.

All else equal, a higher volatility target index will likely have more weight in asset classes typically considered to be riskier, such as equities, than a lower volatility target index. Due to this, in an up market, a 15% volatility target index may result in the index participating in more equity upside than an index with a 5% target. In a down market, however, the higher volatility target could result in the index participating more on the downside as well.

What Is a Volatility-Controlled Index?

A VCI is one that is designed to manage to a target volatility level, typically measured by the realized volatility of the underlying index.

The most common components of a VCI are an equity component and a theoretical cash component. While equity indices seem to be the most frequently used indices in the insurance industry, multi-asset indices, such as the S&P MARC 5% Index, have also increased in usage in recent years.

As a general principle, when market volatility is higher than the target volatility level of the index, the index will allocate away from equity to the cash component to dampen volatility. On the other hand, when market volatility is lower than the target, the index may allocate more than 100% weight to the underlying index component. Allocation in a VCI context refers to the weight attributed to each asset class (as previously mentioned, most commonly an equity component and a theoretical cash component) in the index.

The ability to either move index component weighting to cash or increase exposure above 100% helps the index as it seeks to maintain a target volatility level.

An Overview of a Risk Control Index Mechanic: Exhibit 1

What Are the Potential Benefits of VCIs?

Increased Stability: When an index is managed to a volatility target, it typically realizes a more consistent volatility level than an index without a risk overlay.
Simplicity: A volatility-controlled index provides a simple, transparent methodology based on the underlying index’s historical volatility.
Hedging Efficiencies: The more stable volatility experience may improve hedging efficiencies for insurance products based on the index, which may in turn lead to cost savings.

It is important to note that certain potential benefits of VCIs work in tandem with the specific features of insurance products, which are entirely within the control of the insurance carrier.

Insurance carriers may consider the combination of a VCI and the insurance product implementing to look to provide an improved outcome for the carrier’s customers.

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Education - Aug 25, 2025

Effectively Measuring Mega Caps: The S&P 500 Top 50 Index

Hamish Preston

Head of U.S. Equities

S&P Dow Jones Indices

Amit Pathak

Head of U.S. Equity Product Management, Asia-Pacific

S&P Dow Jones Indices

U.S. mega caps have become increasingly important in driving equity returns in recent years amid outperformance from some of the largest companies. Given this elevated importance, this paper provides an overview of the S&P 500^® Top 50 Index, which seeks to measure the performance of mega-cap U.S. equities by selecting the largest 50 companies in the S&P 500 annually. Specifically, this paper:

• Highlights the potential relevance of U.S. mega-caps;
• Outlines the S&P 500 Top 50 Index's construction and analyzes the index's historical risk/return characteristics, and;
• Shows how incorporating U.S. mega-caps could help investors alleviate domestic sector biases.

Exhibit 1 shows that S&P 500 Top 50 Index constituents accounted for around 60% of the U.S. large-cap equity market, as represented by the S&P 500, at the end of June 2025. This figure ranked in the top 10% of quarter-end readings since December 1970 and was far above the long-term average of 51%.

Effectively Measuring Mega Caps: The S&P 500 Top 50 Index: Exhibit 1

Potential Relevance of U.S. Mega-Cap Companies to Global Market Participants

The breadth and depth of the U.S. equity market means that trends affecting U.S. companies tend to be relatively important in driving global equity returns. For example, U.S.-domiciled companies accounted for 62% of the weight of the S&P Global BMI as of June 30, 2025, more than 10 times larger than the index’s second-largest country, Japan.

Exhibit 1 showed that mega-cap companies represented a sizeable portion of the U.S. large-cap equity market, as represented by the S&P 500. Exhibit 2 reinforces the potential relevance of mega-cap U.S. equities by comparing the float market capitalization of the S&P 500 Top 50 Index to the entire U.S. equity market—as measured by the S&P Total Market Index (TMI)—and various size segments therein as of June 30, 2025. While smaller U.S. equity segments are as large as certain countries’ equity markets, S&P 500 Top 50 Index constituents are collectively an order of magnitude larger.

Effectively Measuring Mega Caps: The S&P 500 Top 50: Exhibit 2

Perhaps unsurprisingly, U.S. mega-cap companies can have an outsized impact on global equity returns and measuring their performance may help to identify prevailing market narratives. This is especially the case for certain global equity sectors: Exhibit 3 shows that, as of June 30, 2025, U.S. companies accounted for the majority of the float market capitalization in most S&P Global BMI sectors, and U.S. mega-cap companies accounted for a sizeable proportion of this weight.

For example, U.S.-domiciled companies accounted for 80% of the S&P Global BMI Information Technology sector’s float market capitalization, while S&P 500 Top 50 Index constituents represented 62% of the global Information Technology sector’s weight. In other words, more than three-quarters of the U.S. Information Technology sector representation—or 62% of the 80%—came from S&P 500 Top 50 constituents.

Effectively Measuring Mega Caps: The S&P 500 Top 50: Exhibit 3

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Education - Aug 18, 2025

TalkingPoints: Why What's Under the Dividend and Factor Hood Matters

Rupert Watts

Head of Factors and Dividends

S&P Dow Jones Indices

1. What types of dividend indices exist in the market, and how have market participants historically utilized them?

Dividend indices can generally be categorized into two main types: dividend growth and high yield. Dividend growth indices require that constituents have consistently increased their dividends per share for a minimum number of years. Notable examples include the S&P 500^® Dividend Aristocrats^® and the S&P U.S. Dividend Growers Index. Market participants often utilize these indices for their historically competitive dividend yields and tendency to track higher-quality companies with robust balance sheets and stable earnings. Conversely, high yield dividend indices prioritize companies that offer the highest dividend yields, often incorporating quality screens. While these indices have tended to reflect higher yields than dividend growth indices, they have also tended to be riskier and may exhibit a stronger value tilt.

Historically, dividend indices have attracted market participants as both long-term strategic building blocks and for short-term tactical uses. Their long-term appeal stems from the combination of income and equity participation, along with liquidity and transparency. Tactically, dividend strategies have often been employed during periods of market uncertainty or rising interest rates, as they have historically tended to outperform in defensive environments.

2. How have dividend indices performed during the tariff-related drawdowns, and how have market participants historically utilized them during periods of market volatility?

During the drawdowns earlier this year, our flagship dividend strategies demonstrated meaningful outperformance compared to their broad market benchmarks. For example, the S&P 500 Dividend Aristocrats outperformed the S&P 500 by 8.16% from the peak on Feb. 19, 2025, to the trough on April 8 (see Exhibit 1).

TalkingPoints: Why What's Under the Dividend and Factor Hood Matters: Exhibit 1

In times of market volatility, market participants often turn to dividend strategies to reduce risk. Dividend growth indices in particular are recognized for their defensive characteristics, as companies that have consistently grown their dividends over extended periods tend to be financially resilient and demonstrate a strong track record across various macroeconomic regimes. Additionally, dividend-paying stocks provide regular income through dividends, which can help cushion losses when price appreciation is uncertain.

Overall, while no strategy is risk free, dividend strategies—especially those focused on dividend growth or incorporating quality screens—have historically provided a degree of stability and predictability. In the past, dividend strategies have shown their ability to preserve capital and maintain income during economic uncertainty or market downturns.

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