MSCI USA DIVERSIFIED MULTIPLE-FACTOR
CAPPED SECTOR INDEXES
DIVERSIFIED FACTOR PERFORMANCE OF GICS-BASED SECTOR INDEXESMSCI research has identified four factors – value, momentum, quality and low size – that over time haveprovided higher risk-adjusted returns than the overall market, while performing very differently in various
parts of the business cycle. When combined in a multiple-factor index, these four factors provided a higher
risk-adjusted return, while exhibiting less cyclicality. Now we have applied our multiple-factor methodology tonine individual U.S. sector indexes.

COMBINING FACTORS THAT HAVE GENERATEDPREMIA OVER TIME

A CLOSER LOOK AT THE FOUR FACTORSVALUE• MSCI’s diversified multiple-factor indexes

represent the performance of four factors that

The value factor represents the performance

have historically generated premia over long timeof stocks that have low prices relative to theirhorizons, while maintaining a risk level similar tofundamental value. Stocks are scored usingthat of the corresponding parent index.

three measures: forward price-to-earnings (P/E),
enterprise value/ operating cash flow (EV/CFO) and• The MSCI USA Diversified Multiple-Factor Index(USD) was launched on February 17, 2015. Using

price-to-book (P/B). (EV/CFO is only used for non-back-tested data (i.e., calculations of how the index

financial companies.)

might have performed over a time period had it

MOMENTUM

existed), MSCI calculates that its average annualized
return would have been 7.85% for the 15-year period
ended March 31, 2016. The parent MSCI USA Index
returned an annualized 5.98% for the period. MSCI
modeled the performance for 15 years to capture
the range of performance through multiple macro

The momentum factor represents the performanceof stocks with stronger past performance, based on
the stock’s residual return versus the benchmark
over two years and its six- and twelve-month
relative performance.

QUALITY

market cycles.1• The capped sector versions of this index represent

The quality factor represents the performance ofthe performance of the same four factors, while

stocks characterized by low debt, stable earnings

maintaining a risk level similar to that of thegrowth and other financial “quality” metrics.

corresponding sector of the parent MSCI USA Index.

Stocks are scored using three fundamental
measures: return-on-equity, debt-to-equity andearnings variability.

LOW SIZE
The low size factor represents the performance of1

There are frequently material differences between back-tested
performance and actual results. Past performance — whether actual orback-tested — is no indication or guarantee of future performance.

smaller firms, in terms of market capitalization,
relative to their larger counterparts.

MSCI USA DIVERSIFIED MULTIPLE-FACTOR CAPPED SECTOR INDEXES | MSCI.COM

KEY STEPS IN BUILDING MSCI DIVERSIFIED
MULTIPLE-FACTOR CAPPED SECTOR INDEXESThe MSCI USA Diversified Multiple-Factor Capped Sector
Indexes are based on parent indexes containing U.S.
large and mid-cap securities within each of the 9 sectors
listed in the figure below, respectively, per the Global

The indexes are rebalanced semiannually, at which timethey are optimized with the aim of maximizing overall
exposure to the four factors, while also limiting turnover,unintended exposures to other factors and volatility. The
objective is to maintain a risk level similar to that of thecorresponding sector of the MSCI USA Index.

Industry Classification Standard (GICS®), the global

Each index is constructed using the standard

industry classification standard jointly developed bymethodology of the MSCI Diversified Multiple-Factor

MSCI and Standard & Poor’s. Stocks are identified from

Indexes and exposure to any single issuer is capped

individual US GICS sectors, using a composite alphaat 25%.

score that gives equal weighting to each of four factors:

To learn more visit www.msci.com/index-methodology

value, momentum, quality and low size.

ANNUALIZED 15 YEAR PERFORMANCE AND RISK OF MSCI MSCI USA DIVERSIFIED MULTIPLE-FACTOR
CAPPED SECTOR INDEXES AS OF MARCH 31, 2016
INDEX

2TOTAL RETURNTOTAL RISK2RETURN/RISK

USA/ENERGY

7.12%

20.52%

0.35

USA/ENERGY DIV MULTIPLE-FACTOR CAPPED

9.54%

21.61%

0.44

USA/MATERIALS

7.79%

21.49%

0.36

USA/MATERIALS DIV MULTIPLE-FACTOR CAPPED9.68%

21.41%

0.45

USA/INDUSTRIALS

6.57%

18.40%

0.36

USA/INDUSTRIALS DIV MULTIPLE-FACTOR CAP

7.86%

18.73%

0.42

USA/CONSUMER DISCRETIONARY

7.47%

18.61%

0.40

USA/CONS DISCR DIV MULTIPLE-FACTOR CAP

8.69%

18.16%

0.48

USA/CONSUMER STAPLES

9.22%

10.68%

0.86

USA/CON STAPLES DIV MULTIPLE-FACTOR CAP

9.54%

11.29%

0.84

USA/HEALTH CARE

7.15%

13.11%

0.55

USA/HEALTH CARE DIV MULTIPLE-FACTOR CAP

8.75%

13.00%

0.67

USA/FINANCIALS

1.54%

20.95%

0.07

USA/FINANCIALS DIV MULTIPLE-FACTOR CAP

3.43%

19.29%

0.18

USA/INFORMATION TECH

6.41%

22.44%

0.29USA/INF TECH DIV MULTIPLE-FACTOR CAPPED6.81%

22.10%

0.31

USA/UTILITIES

5.32%

15.31%

0.35

USA/UTILITIES DIV MULTIPLE-FACTOR CAPPED

7.06%

14.68%

0.48

Annualized standard deviation based on gross monthly returns.

The information contained herein (the “Information”) may not be reproduced or redisseminated in whole or in part without prior written permission from MSCI. The Information may not be used to verify orcorrect other data, to create indexes, risk models, or analytics, or in connection with issuing, offering, sponsoring, managing or marketing any securities, portfolios, financial products or other investment
vehicles. Historical data and analysis should not be taken as an indication or guarantee of any future performance, analysis, forecast or prediction. None of the Information or MSCI index or other product orservice constitutes an offer to buy or sell, or a promotion or recommendation of, any security, financial instrument or product or trading strategy. Further, none of the Information or any MSCI index is intended
to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. The Information is provided “as is” and the user of theInformation assumes the entire risk of any use it may make or permit to be made of the Information. NONE OF MSCI INC. OR ANY OF ITS SUBSIDIARIES OR ITS OR THEIR DIRECT OR INDIRECT SUPPLIERS ORANY THIRD PARTY INVOLVED IN THE MAKING OR COMPILING OF THE INFORMATION (EACH, AN “MSCI PARTY”) MAKES ANY WARRANTIES OR REPRESENTATIONS AND, TO THE MAXIMUM EXTENT PERMITTED BYLAW, EACH MSCI PARTY HEREBY EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. WITHOUT LIMITING ANY OFTHE FOREGOING AND TO THE MAXIMUM EXTENT PERMITTED BY LAW, IN NO EVENT SHALL ANY OF THE MSCI PARTIES HAVE ANY LIABILITY REGARDING ANY OF THE INFORMATION FOR ANY DIRECT, INDIRECT,SPECIAL, PUNITIVE, CONSEQUENTIAL (INCLUDING LOST PROFITS) OR ANY OTHER DAMAGES EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. The foregoing shall not exclude or limit any liability
that may not by applicable law be excluded or limited. It is not possible to invest directly in an index. Exposure to an asset class or trading strategy or other category represented by an index is only available
through third party investable instruments (if any) based on that index. MSCI does not issue, sponsor, endorse, market, offer, review or otherwise express any opinion regarding any fund, ETF, derivative orother security, investment, financial product or trading strategy that is based on, linked to or seeks to provide an investment return related to the performance of any MSCI index (collectively, “Index LinkedInvestments”). MSCI makes no assurance that any Index Linked Investments will accurately track index performance or provide positive investment returns. MSCI Inc. is not an investment adviser or fiduciaryand MSCI makes no representation regarding the advisability of investing in any Index Linked Investments. Index returns do not represent the results of actual trading of investible assets/securities. MSCImaintains and calculates indexes, but does not manage actual assets. Index returns do not reflect payment of any sales charges or fees an investor may pay to purchase the securities underlying the index orIndex Linked Investments. The imposition of these fees and charges would cause the performance of an Index Linked Investment to be different than the MSCI index performance.
©2016 MSCI Inc. All rights reserved | CFS0516

MSCI USA DIVERSIFIED MULTIPLE-FACTOR CAPPED SECTOR INDEXES | MSCI.COM