USDirect intends to give clients the best representation of stocks that tracks the US equity market. It follows a four steps process:
First, stocks in the S&P 500 index are used to define broad US market exposure.
Second, factor exposures across value, growth and minimum volatility are incorporated to enhance long term returns, reduce volatility, and improve diversification.
Third, the stock weightages are optimised to minimise tracking error to the broad US market and preserve factor exposures. This results in top 100 stocks that best represent the Core portfolio US exposure.
Lastly, allocations are optimised twice a year to address price and factor drifts over time.