Our geographic revenue exposure indices target Canadian or U.S. markets by capturing the performance of S&P/TSX 60 companies with revenues that center on these countries. The top one-half of those companies with the highest proportion of revenues within the target region are selected for inclusion within the relevant index. Constituents are then weighted by float market cap times the revenue exposure score. By creating the S&P/TSX 60 Canada Revenue Exposure Index, we are able to increase exposure to Canadian-centered companies, delivering an index that is designed to provide comparably higher exposure to Canadian-based revenues. Likewise, the S&P/TSX 60 U.S. Revenue Exposure Index shifts focus toward companies with U.S.-centered revenues.
Sector weight and composition differences have contributed to performance differences within each index and include the following.
- The domestic revenue nature of Canadian banks tilts the financials sector weight away from the U.S., while Brookfield Asset Management somewhat offsets this due to the nature of its foreign- and U.S.-based revenues.
- Telecommunication services companies (primarily BCE Inc.) generate a majority of their revenues domestically, favoring exposure to Canada.
- Materials companies gain a higher proportion of revenues from within the U.S.
- Exploration- and production-focused energy companies generate more revenues within Canada, whereas revenues from pipeline companies are skewed toward the U.S.
- Notably, currency fluctuations, including CAD or USD strengthening or weakening, affect the value of Canadian exports when domestic companies earn revenues in foreign currencies and convert these back into Canadian dollars.