PRISM™ is an index-based solution intended to provide multi-asset diversification within a simple risk-weighting framework. Constructed as an index of indices, it measures the performance of an inverse-risk-weighted basket of three component indices representing fixed income, equities, and commodities, after accounting for technical and fundamental indicators.
Equities, fixed income, and commodities are weighted by the inverse of their volatility.
Volatility target of 5.5% is achieved by allocating to the reference index versus cash.
1. Calculate three trend allocation signals representing the three asset classes in the index
2. Rank long-term asset class returns on 200-day excess returns
3. Scale volatilities based on momentum, valuation, and yield curve multiplier
4. Weight components by the inverse of their volatility
5. Calculate the reference index on a 2-day lag
6. Add a risk-control overlay with a 5.5% target to create the S&P PRISMTM Index
To learn more about PRISM, or to download the index methodology, fact sheet, or data, visit the S&P PRISM Index page.