Index Education

Indexing GARP Strategies:
A Practitioner’s Guide
Contributors
Wenli Bill Hao
Director
Global Research & Design
wenli.hao@spglobal.com
Aye M. Soe, CFAManaging Director
Global Head of ProductManagementaye.soe@spglobal.com

THE GARP STRATEGY
Growth at a Reasonable Price (GARP) is a well-known, much-practiced
investment approach. It is a fundamental-driven investment strategy thatbalances pure growth and pure valuation, as the former tends to invest in
high-growth, yet expensive stocks, while the latter may take a long-term
investment to pay off. Primarily, the GARP strategy favors investing incompanies with consistent earnings and sales growth, reasonablevaluation, and solid financial strength, combined with strong profitability.
The underlying investment thesis of the S&P 500® GARP Index seeks totrack the GARP strategy and earn higher risk-adjusted returns than its
underlying universe over a long-term investment horizon.
In this paper, we introduce the S&P 500 GARP Index, its strategy,
construction methodology, risk/return profile, factor exposures, andattribution analysis.

ESTABLISHING THE MULTI-FACTOR FRAMEWORKWe use a systematic bottom-up approach for stock selection and portfolio
construction (see Exhibit 1), which we summarize as follows.
1. Define the investment universe (the S&P 500).
2. Identify factors with the potential to fulfill the GARP investment strategy.
3. Select sensible factors for multi-factor metrics.
4. Select constituents with well-defined rules.
5. Construct a constituent portfolio with a predefined weighting
methodology.
Exhibit 1: Multi-Factor Investment Process
Investment
Universe

FactorDefinition

Factor
Selection

Constituent
Selection

Portfolio
Construction

Source: S&P Dow Jones Indices LLC. Chart is provided for illustrative purposes.

Register to receive our latest research, education, and commentary at go.spdji.com/SignUp.

Indexing GARP Strategies: A Practitioner’s Guide

July 2019

Exhibit 2 shows the style and factor components1 for the GARP strategy.
We use three-year EPS
and SPS growth
metrics to capture afirm’s growth…

Exhibit 2: Style and Factor Components of the S&P 500 GARP Index
STYLE

FACTOR COMPONENTS

1. Three-Year Earnings per Share (EPS) Growth
2. Three-Year Sales per Share (SPS) Growth
1. Financial Leverage Ratio
Quality & Value (QV) Composite
2. Return on Equity (ROE)
3. Earnings-to-Price Ratio
Source: S&P Dow Jones Indices LLC. Table is provided for illustrative purposes.
GrowthWe use three-year EPS and SPS growth metrics to capture a firm’s growth. Inorder to maintain sustainable growth, a firm needs to be highly profitable (highROE) and not have excessive leverage (low financial leverage ratio). We also use
the earnings-to-price ratio to gauge a firm’s reasonable valuation. These factors
effectively enact the characteristics of the GARP strategy.
…and financial
leverage ratio, ROE,
and earning-to-priceratio to gauge its
reasonable valuation.

DATA AND METHODOLOGYThe underlying universe for our study is the S&P 500. To avoid survivorship bias,
we include companies currently and historically in the benchmark. To prevent lookahead bias, we lag the fundamental data by 45 days. Compustat is the main data
source for company-level fundamental data.

STYLE AND FACTOR SCORE CALCULATIONS
Score calculation is an integral step of any multi-factor strategy. We calculate thegrowth z-score and QV composite z-score for each of the stocks in the eligible
universe. The growth z-score is calculated as the winsorized z-score average of
two factors: the three-year EPS growth and three-year SPS growth.2 If a z-score
for one factor is not available or properly calculated, the z-score of the other factor
will be used as the growth z-score.
Next, we compute the QV composite z-score as the winsorized z-score average ofthree factors: financial leverage ratio, ROE, and earnings-to-price ratio. A stockneeds to have quality and value scores. If the z-score for one of the quality scores
is not available or properly calculated, the z-score of the other quality factor will be
used.
With the style and factor scores in place, we proceed to the third step of the multifactor investment process: security selection.

1

Fundamental ratio and winsorization definitions are shown in Appendix A.

2Z-score computation details are shown in Appendix B.

INDEX EDUCATION | Factors 101

2Indexing GARP Strategies: A Practitioner’s Guide

July 2019

MULTI-FACTOR SEQUENTIAL FILTERING PROCESSWe use a multi-factor
sequential filtering
approach to implement
the GARP strategy.

In filter 1, stocks areranked by their growthz-scores, with the top
150 stocks remaining
eligible for constituent
inclusion…

There are a number of approaches to constructing multi-factor portfolios—
integration,3 sequential filtering, and optimization. For the S&P 500 GARP Index,
we use the sequential filtering method, as it is simple, intuitive, and effective inproviding the targeted factor exposures.
Multi-factor sequential filtering selects stocks using two layers of filters, as shown in
Exhibit 3. In the first step (filter 1), stocks are ranked by their growth z-scores, withthe top 150 stocks remaining eligible for constituent inclusion. In the second step
(filter 2), those 150 stocks are then ranked by their QV composite z-scores. The
top 75 stocks are selected to be included in the strategy after applying a 20%
buffer rule.4 The 20% buffer is applied to reduce portfolio turnover.
Exhibit 3: Multi-Factor Sequential Filtering Process
S&P 500 Universe…and in filter 2, thosestocks are ranked bytheir QV composite zscores, and the top 75
are selected.

Filter 1: Growth Z-Score(Top 150 Constituents)

Filter 2: QV Z-Score(Top 75 Stocks)
Source: S&P Dow Jones Indices LLC. Chart is provided for illustrative purposes.

CONSTITUENT WEIGHTS
Once constituents are selected (at the start and at each rebalance), eligible
securities are weighted by their growth score 5 to achieve the strategy’s growth
exposure. To limit the impact of extreme values, the maximum weight of a security
is capped at 5%. Individual Global Industry Classification Standard (GICS®) sector
exposure (the constituent weight in each sector) is capped at 40% to broaden thestrategy’s sector exposure.

RETURN/RISK PROFILE
Back-tested results show that the GARP strategy has had higher cumulative
returns than the underlying benchmark, as well as the S&P 500 Quality Index, S&P
500 Growth, and S&P 500 Enhanced Value Index (see Exhibit 4).

3

Please see the S&P Quality, Value & Momentum Multi-Factor Indices Methodology for more information.

4

Buffer rule is shown in Appendix C.

5Growth score computation details are shown in Appendix B.

INDEX EDUCATION | Factors 101

3Indexing GARP Strategies: A Practitioner’s Guide

July 2019

Exhibit 4: Cumulative Performance of the S&P 500 GARP Index against Other
S&P Factor Indices
2,000
S&P 500 GARP Index
1,800
S&P 500 Enhanced Value Index
1,600
S&P 500 Growth
1,400

Performance

Historically, the GARP
strategy has delivered
higher returns than its
underlying benchmark...

S&P 500 Quality Index
1,200
S&P 500
1,000
800
600
400
200

June 2018

June 2017

June 2016

June 2015

June 2014

June 2013

June 2012

June 2011

June 2010

June 2009

June 2008

June 2007

June 2006

June 2005

June 2004

June 2003

June 2002

June 2001

June 2000

June 1999

June 1998

June 1997

June 1995

June 19960…as well as othersingle factor indices.

Source: S&P Dow Jones Indices LLC. Data from June 30, 1995, to May 31, 2019. Index performancebased on total return in USD. Past performance is no guarantee of future results. Chart is provided forillustrative purposes and reflects hypothetical historical performance. Please see the Performance
Disclosure at the end of this document for more information regarding the inherent limitations associatedwith back-tested performance.

The S&P 500 GARP
Index also had thehighest annualized
average return and thesecond-highest riskadjusted returns.

Exhibit 5 shows the average risk/return profile of the S&P 500 GARP Index against
the same set of indices as Exhibit 4. The S&P 500 GARP Index had the highest
annualized average return (13.28%). On a risk-adjusted basis, the S&P 500 GARP
Index ranked second (0.75) after the S&P 500 Quality Index (0.93), but was higher
than the other factor indices—the S&P 500 Enhanced Value Index (0.64) and S&P
500 Growth (0.68)—as well as the S&P 500 (0.67).
Exhibit 5: Risk/Return Profile Comparison of S&P 500 GARP Index with Other S&P Factor
Indices
S&P 500
S&P 500 S&P 500 ENHANCED
S&P 500
S&P
CATEGORYGARP INDEX GROWTHVALUE INDEX QUALITY INDEX
500
Average Return
13.28
10.41
11.83
12.69
9.81
(Annualized, %)Standard Deviation
17.79
15.34
18.57
13.68 14.75(Annualized, %)Return/Risk
0.75
0.68
0.64
0.93
0.67
Source: S&P Dow Jones Indices LLC. Data from June 30, 1995, to May 31, 2019. Index performancebased on total return in USD. Past performance is no guarantee of future results. Table is provided forillustrative purposes and reflects hypothetical historical performance. Please see the Performance
Disclosure at the end of this document for more information regarding the inherent limitations
associated with back-tested performance.

INDEX EDUCATION | Factors 101

4Indexing GARP Strategies: A Practitioner’s Guide

July 2019

With the S&P 500 as the underlying benchmark, we can use the information ratio(IR)6 to evaluate whether a strategy is able to add value for each incremental unitof active risk taken (see Exhibit 6).

We can use the IR toevaluate whether astrategy is able to add
value for eachincremental unit ofactive risk taken.

Exhibit 6: Excess Return and IR Comparison of S&P 500 GARP Index with Other S&P Factor
Indices
S&P 500
S&P 500
S&P 500 ENHANCED
S&P 500
CATEGORYGARP INDEXGROWTHVALUE INDEX QUALITY INDEX
Average Excess
3.46
0.60
2.02
2.88
Return (Annualized, %)Standard Deviation
7.32
4.08
9.48
4.96
(Annualized)
IR

0.47

0.15

0.21

0.58

Source: S&P Dow Jones Indices LLC. Data from June 30, 1995, to May 31, 2019. Index performancebased on total return in USD. Past performance is no guarantee of future results. Table is provided forillustrative purposes and reflects hypothetical historical performance. Please see the Performance
Disclosure at the end of this document for more information regarding the inherent limitations
associated with back-tested performance.

The GARP strategy had
a higher IR (0.47) than
the growth (0.15) andenhanced value indices(0.21).

As seen in Exhibit 6, the S&P 500 GARP Index had a positive IR of 0.47 over the
long-term investment horizon, which was higher than the S&P 500 Growth (0.15)
and S&P 500 Enhanced Value Index (0.21), but it had a lower IR than the S&P 500
Quality Index (0.58).

TARGETED FACTOR EXPOSURES
Exhibit 7 shows the active exposures (in percentages) of the S&P 500 GARP Index
to the five fundamental metrics used in GARP strategies: three-year SPS growth,three-year EPS growth, earnings-to-price ratio, ROE, and financial leverage ratio.
We define active exposure as the portfolio factor exposure minus the benchmark
factor exposure, and we define factor percentage exposure as the active exposureof one factor divided by the sum of all five factors. We then take the monthly
average of all the periods to represent the average active exposure. In Exhibit 7,
we see that SPS growth and EPS growth had exposure levels that dominated thefactor exposures, with 31% and 27%, respectively. The earnings-to-price ratio,
ROE, and financial leverage ratio had exposures of 14%, 11%, and 16%,
respectively. The factor exposure levels in the first layer of filters doubled that of
the second layer of filters. The exposure results show that the multi-factor
sequential filtering approach achieved its designed goal.

6

Information ratio definition is shown in Appendix C.

INDEX EDUCATION | Factors 101

5Indexing GARP Strategies: A Practitioner’s Guide

July 2019

Exhibit 7: Active Factor Exposure of the S&P 500 GARP Index
Financial Leverage Ratio

ROE

Earnings-to-Price Ratio

Three-Year EPS GrowthThree-Year SPS Growth

100%
90%
80%
70%

Factor Exposure (%)

Active factor exposure
analysis shows that thesequential filtering
approach achieved its
designed goal.

60%
50%
40%
30%
20%
10%

The active weight of the
S&P 500 GARP Index
has been no more than7%.

May 2018

May 2017

May 2016

May 2015

May 2014

May 2013

May 2012

May 2011

May 2010

May 2009

May 2008

May 2007

May 2006

May 2005

May 2004

May 2003

May 2002

May 2001

May 2000

May 1999

May 1998

May 1997

May 1996

May 19950%

Source: S&P Dow Jones Indices LLC. Data from June 30, 1995, to May 31, 2019. Chart is provided forillustrative purposes and reflects hypothetical historical performance. Please see the Performance
Disclosure at the end of this paper for more information regarding the inherent limitations associatedwith back-tested performance.

SECTOR COMPOSITION
In order to reduce concentration risk, we limit the maximum weight of each sector
to 40%. As shown in Exhibit 8, historically the active weight 7 of the S&P 500
GARP Index has been no more than 7%.

7

Active weight is defined as the portfolio sector weight minus the benchmark sector weight.

INDEX EDUCATION | Factors 101

6Indexing GARP Strategies: A Practitioner’s Guide

July 2019

Exhibit 8: GARP Strategy Monthly Average of Sector Composition
S&P 500 GARP INDEX(%)

S&P 500 (%)

ACTIVE WEIGHT (%)

0.72

4.29

-3.57

18.58

11.78

6.80

Consumer Staples

4.21

10.15

-5.94

Energy

12.09

8.70

3.39

Financials

10.94

16.54

-5.60

Health Care

12.29

12.82

-0.53

Industrials

11.11

10.53

0.58

Information
Technology

20.71

18.04

2.67

Materials

6.25

3.39

2.85

Real Estate

0.20

0.32

-0.12

Utilities

2.62

3.31

-0.69

Unassigned

0.29

0.13

0.15

SECTOR
Communication
Services
Consumer
Discretionary

Source: S&P Dow Jones Indices LLC. Data from June 30, 1995, to May 31, 2019. Index performancebased on total return in USD. Attribution analysis is done with FactSet Portfolio Analysis 3.0. Past
performance is no guarantee of future results. Table is provided for illustrative purposes and reflects
hypothetical historical performance. Please see the Performance Disclosure at the end of thisdocument for more information regarding the inherent limitations associated with back-tested
performance.

PERFORMANCE ATTRIBUTION
Performance attribution
shows that the GARP
strategy outperformance
has mainly come fromstock selection rather
than sector allocation.

8

Using the S&P 500 as the benchmark, we analyze the GARP strategy’s sources ofexcess returns over the back-tested period. Grouping by sectors, we look at thesector allocation8 and individual stock selection effects (see Exhibit 9).
Performance attribution shows that individual stock selection contributed to 73% ofactive returns, while sector allocation contributed to 27%. It thus shows that the
GARP strategy outperformance has mainly come from stock selection rather thansector allocation.

Sector allocation effect is the portion of portfolio excess return attributed to taking on sector bets in comparison with the benchmark.
Individual stock selection effect is the portion of portfolio excess return attributable to individual stock selection when the sector weight is thesame as that in the benchmark.

INDEX EDUCATION | Factors 101

7Indexing GARP Strategies: A Practitioner’s Guide

July 2019

Exhibit 9: GARP Strategy Monthly Average of Performance Attribution
SECTOR

ALLOCATION EFFECT (%)

SELECTION EFFECT (%)

TOTAL EFFECT (%)

0.15

0.04

0.19

0.17

0.16

0.33

0.02

0.04

0.05

Energy

0.23

0.37

0.60

Financials

-0.11

0.13

0.02

Health Care

-0.08

0.77

0.69

Industrials

-0.01

-0.30

-0.31

Information
Technology

0.58

0.71

1.29

Materials

-0.03

0.32

0.29

Real Estate

0.00

-0.00

-0.01

Utilities

0.07

0.27

0.34

Unassigned

-0.04

-0.02

-0.06

Total

1.03

2.80

3.83

Communication
Services
Consumer
Discretionary
Consumer
Staples

Source: S&P Dow Jones Indices LLC. Data from June 30, 1995, to May 31, 2019. Index performancebased on total return in USD. Attribution analysis is done with FactSet Portfolio Analysis 3.0. Past
performance is no guarantee of future results. Table is provided for illustrative purposes and reflects
hypothetical historical performance. Please see the Performance Disclosure at the end of thisdocument for more information regarding the inherent limitations associated with back-tested
performance.

CONCLUSIONThe S&P 500 GARP
Index seeks to balancepure growth and purevaluation.

Aiming to balance pure growth and pure valuation exposures, the S&P 500 GARP
Index uses a multi-factor sequentially filtering stock selection process. The backtested results show that the strategy had better long-term risk-adjusted returns thanthe S&P 500 and other single factor indices, with the exception of the S&P 500
Quality Index. Moreover, factor exposure analysis shows that the multi-factor
sequential filtering approach has achieved its objective of targeted factor exposurelevel. Performance attribution reveals that selection effect (versus allocation effect)
has dominated the sources of excess return of the S&P 500 GARP Index over the
S&P 500.

INDEX EDUCATION | Factors 101

8Indexing GARP Strategies: A Practitioner’s Guide

July 2019

APPENDIX A
Fundamental Ratios Calculation
As of the rebalancing reference date, fundamental ratios were calculated for each security in the index
universe. They are defined as follows.


Three-Year EPS Growth: This is calculated as a company’s three-year EPS compound annual
growth rate (CAGR).



Three-Year SPS Growth: This is calculated as a company’s three-year SPS CAGR.



ROE: This is calculated as a company’s trailing 12-month EPS divided by its latest book value
per share (BVPS).
ROE =



Financial Leverage Ratio: This is calculated as a company’s latest total debt divided by its
BVPS.
Financial Leverage Ratio =



EPS
BVPS

Total Debt
BVPS x Common Shares Outstanding

Earnings-to-Price Ratio: This is calculated as a company’s trailing 12-month EPS divided byits price.
Earnings to Price =

EPS
Price

Outlier Handling and Winsorization: Outlier fundamental ratios are winsorized to ensure that the
average values used to calculate the overall component score are less distorted by extreme values.
For a given fundamental variable, the values for all securities are first ranked in ascending order. Then,for securities that lie above the 97.5 percentile rank or below the 2.5 percentile rank, their value is set
as equal to the value of the 97.5 percentile ranked or the 2.5 percentile ranked security, whichever isapplicable.


ROE. If the underlying data points for a given stock’s ROE are both negative, leading toa positive ROE, its ROE value will be excluded and the stock will be assigned an ROE zscore set as equal to the ROE z-score value of the 2.5 percentile ranked security.

Financial Leverage Ratio. If the underlying data point for a given stock’s BVPS is
negative, leading to a negative leverage, its leverage value will be excluded and thestock will be assigned a leverage z-score set as equal to the leverage z-score value ofthe 2.5 percentile ranked security.

INDEX EDUCATION | Factors 101

9Indexing GARP Strategies: A Practitioner’s Guide

July 2019

APPENDIX B
Z-Score and Growth Score Computation
Z-Score Computation: Computing a z-score is a widely adopted method of standardizing a variable inorder to combine it with other variables that may have a different scale or unit of measurement. After
winsorizing all the fundamental ratios, the z-score for each of the ratios for each security is calculatedusing the mean and standard deviation of the relevant variable within each of the index universes.
The z-score is calculated as follows.
𝑧𝛼=(𝑥𝛼−𝜇𝛼)/𝜎𝛼
Financial Leverage Ratios: The z-score is calculated as follows.
𝑧𝛼= -(𝑥𝛼−𝜇𝛼)/𝜎𝛼
where:𝑧𝛼 = Z-score for a given security𝑥𝛼 = Winsorized variable for a given security
𝜇𝛼 = Arithmetic mean of the winsorized variable in a given index universe, excluding any
missing values
𝜎𝛼 = Standard deviation of the winsorized variable in a given index universe
Average Z-score Computation: For each security, the average z-score is computed by taking
a simple average of the relevant scores. Where there is a missing value, the average z-score iscomputed by taking a simple average of the remaining scores. A security must have at least
one z-score for it to be included in the index.
Outlier Handling and Winsorization: Outlier average z-scores are winsorized to ensure thatthe overall growth scores are less distorted by extreme values. To do this, for a given averagez-score, the values for all securities are first ranked in ascending order. Then, for securities thatlie above 4 or below -4, their value is set as equal to 4 or -4, whichever is applicable.
Growth Score Computation: Using the winsorized growth z-score, a growth score is computedfor each of the securities. For a given security, if its winsorized growth z-score is above 0, thenits growth score will be the addition of 1 and the winsorized growth z-score. On the other hand,
if its winsorized growth z-score is below 0, then its growth score will be the result of thereciprocal of 1 subtracted by its winsorized growth z-score.
If average Z > 0, Growth Score = 1 + Z.
If average Z < 0, Growth Score = (1/(1– Z)).
If average Z = 0, Growth Score = 1.

INDEX EDUCATION | Factors 101

10Indexing GARP Strategies: A Practitioner’s Guide

July 2019

APPENDIX C
Buffer Rule
A 20% buffer is applied to stocks already in the index in order to reduce portfolio turnover and is
implemented as follows.
1.1 Stocks in the top 150, based on their growth z-score, are ranked by QV composite z-score.
The top 60 stocks are automatically chosen for index inclusion.
1.2 Stocks that are current constituents that fall within the top 90 by QV composite z-score arechosen for index inclusion in order of their QV composite z-score.
1.3 If at this point 75 stocks have not been selected, the remaining stocks are chosen based on
their QV composite z-score until the target count is reached.

Information Ratio Definition
Information ratio (IR) is defined as below,
Where the tracking error is defined as the standard deviation of the difference between thestrategy and benchmark returns.
IR =INDEX EDUCATION | Factors 101

Strategy Return − Benchmark Return
Tracking Error

11

Indexing GARP Strategies: A Practitioner’s Guide

July 2019

PERFORMANCE DISCLOSURE
The S&P 500 GARP Index was launched February 25, 2019. The S&P 500 Enhanced Value Index was launched April 27, 2015. The S&P 500
Quality Index was launched July 8, 2014. All information presented prior to an index’s Launch Date is hypothetical (back-tested), not actual
performance. The back-test calculations are based on the same methodology that was in effect on the index Launch Date. However, whencreating back-tested history for periods of market anomalies or other periods that do not reflect the general current market environment, index
methodology rules may be relaxed to capture a large enough universe of securities to simulate the target market the index is designed tomeasure or strategy the index is designed to capture. For example, market capitalization and liquidity thresholds may be reduced. Complete
index methodology details are available at www.spdji.com. Past performance of the Index is not an indication of future results. Prospective
application of the methodology used to construct the Index may not result in performance commensurate with the back-test returns shown.
S&P Dow Jones Indices defines various dates to assist our clients in providing transparency. The First Value Date is the first day for which
there is a calculated value (either live or back-tested) for a given index. The Base Date is the date at which the Index is set at a fixed value forcalculation purposes. The Launch Date designates the date upon which the values of an index are first considered live: index values provided
for any date or time period prior to the index’s Launch Date are considered back-tested. S&P Dow Jones Indices defines the Launch Date as
the date by which the values of an index are known to have been released to the public, for example via the company’s public website or its
datafeed to external parties. For Dow Jones-branded indices introduced prior to May 31, 2013, the Launch Date (which prior to May 31, 2013,
was termed “Date of introduction”) is set at a date upon which no further changes were permitted to be made to the index methodology, butthat may have been prior to the Index’s public release date.
The back-test period does not necessarily correspond to the entire available history of the Index. Please refer to the methodology paper for theIndex, available at www.spdji.com for more details about the index, including the manner in which it is rebalanced, the timing of such
rebalancing, criteria for additions and deletions, as well as all index calculations.
Another limitation of using back-tested information is that the back-tested calculation is generally prepared with the benefit of hindsight. Backtested information reflects the application of the index methodology and selection of index constituents in hindsight. No hypothetical record cancompletely account for the impact of financial risk in actual trading. For example, there are numerous factors related to the equities, fixedincome, or commodities markets in general which cannot be, and have not been accounted for in the preparation of the index information set
forth, all of which can affect actual performance.
The Index returns shown do not represent the results of actual trading of investable assets/securities. S&P Dow Jones Indices LLC maintains
the Index and calculates the Index levels and performance shown or discussed, but does not manage actual assets. Index returns do notreflect payment of any sales charges or fees an investor may pay to purchase the securities underlying the Index or investment funds that are
intended to track the performance of the Index. The imposition of these fees and charges would cause actual and back-tested performance ofthe securities/fund to be lower than the Index performance shown. As a simple example, if an index returned 10% on a US $100,000
investment for a 12-month period (or US $10,000) and an actual asset-based fee of 1.5% was imposed at the end of the period on theinvestment plus accrued interest (or US $1,650), the net return would be 8.35% (or US $8,350) for the year. Over a three year period, anannual 1.5% fee taken at year end with an assumed 10% return per year would result in a cumulative gross return of 33.10%, a total fee of US$5,375, and a cumulative net return of 27.2% (or US $27,200).

INDEX EDUCATION | Factors 101

12Indexing GARP Strategies: A Practitioner’s Guide

July 2019

GENERAL DISCLAIMER
Copyright © 2019 S&P Dow Jones Indices LLC. All rights reserved. STANDARD & POOR’S, S&P, S&P 500, S&P 500 LOW VOLATILITYINDEX, S&P 100, S&P COMPOSITE 1500, S&P MIDCAP 400, S&P SMALLCAP 600, S&P GIVI, GLOBAL TITANS, DIVIDEND
ARISTOCRATS, S&P TARGET DATE INDICES, GICS, SPIVA, SPDR and INDEXOLOGY are registered trademarks of Standard & Poor’s
Financial Services LLC, a division of S&P Global (“S&P”). DOW JONES, DJ, DJIA and DOW JONES INDUSTRIAL AVERAGE are registeredtrademarks of Dow Jones Trademark Holdings LLC (“Dow Jones”). These trademarks together with others have been licensed to S&P Dow
Jones Indices LLC. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC.
This document does not constitute an offer of services in jurisdictions where S&P Dow Jones Indices LLC, S&P, Dow Jones or their respective
affiliates (collectively “S&P Dow Jones Indices”) do not have the necessary licenses. Except for certain custom index calculation services, allinformation provided by S&P Dow Jones Indices is impersonal and not tailored to the needs of any person, entity or group of persons. S&P
Dow Jones Indices receives compensation in connection with licensing its indices to third parties and providing custom calculation services.
Past performance of an index is not an indication or guarantee of future results.
It is not possible to invest directly in an index. Exposure to an asset class represented by an index may be available through investable
instruments based on that index. S&P Dow Jones Indices does not sponsor, endorse, sell, promote or manage any investment fund or otherinvestment vehicle that is offered by third parties and that seeks to provide an investment return based on the performance of any index. S&P
Dow Jones Indices makes no assurance that investment products based on the index will accurately track index performance or provide
positive investment returns. S&P Dow Jones Indices LLC is not an investment advisor, and S&P Dow Jones Indices makes no representation
regarding the advisability of investing in any such investment fund or other investment vehicle. A decision to invest in any such investment
fund or other investment vehicle should not be made in reliance on any of the statements set forth in this document. Prospective investors areadvised to make an investment in any such fund or other vehicle only after carefully considering the risks associated with investing in suchfunds, as detailed in an offering memorandum or similar document that is prepared by or on behalf of the issuer of the investment fund orother investment product or vehicle. S&P Dow Jones Indices LLC is not a tax advisor. A tax advisor should be consulted to evaluate theimpact of any tax-exempt securities on portfolios and the tax consequences of making any particular investment decision. Inclusion of asecurity within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to beinvestment advice. Closing prices for S&P Dow Jones Indices’ US benchmark indices are calculated by S&P Dow Jones Indices based on theclosing price of the individual constituents of the index as set by their primary exchange. Closing prices are received by S&P Dow Jones
Indices from one of its third party vendors and verified by comparing them with prices from an alternative vendor. The vendors receive theclosing price from the primary exchanges. Real-time intraday prices are calculated similarly without a second verification.
These materials have been prepared solely for informational purposes based upon information generally available to the public and fromsources believed to be reliable. No content contained in these materials (including index data, ratings, credit-related analyses and data,
research, valuations, model, software or other application or output therefrom) or any part thereof (“Content”) may be modified, reverseengineered, reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written
permission of S&P Dow Jones Indices. The Content shall not be used for any unlawful or unauthorized purposes. S&P Dow Jones Indices andits third-party data providers and licensors (collectively “S&P Dow Jones Indices Parties”) do not guarantee the accuracy, completeness,timeliness or availability of the Content. S&P Dow Jones Indices Parties are not responsible for any errors or omissions, regardless of thecause, for the results obtained from the use of the Content. THE CONTENT IS PROVIDED ON AN “AS IS” BASIS. S&P DOW JONESINDICES PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWAREERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATEWITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Dow Jones Indices Parties be liable to any party for any
direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses(including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the Content even if advised of thepossibility of such damages.
S&P Global keeps certain activities of its various divisions and business units separate from each other in order to preserve the independence
and objectivity of their respective activities. As a result, certain divisions and business units of S&P Global may have information that is notavailable to other business units. S&P Global has established policies and procedures to maintain the confidentiality of certain non-public
information received in connection with each analytical process.
In addition, S&P Dow Jones Indices provides a wide range of services to, or relating to, many organizations, including issuers of securities,
investment advisers, broker-dealers, investment banks, other financial institutions and financial intermediaries, and accordingly may receive
fees or other economic benefits from those organizations, including organizations whose securities or services they may recommend, rate,
include in model portfolios, evaluate or otherwise address.

INDEX EDUCATION | Factors 101

13