Over the past few decades, best practices for global equity benchmark construction have converged on a few key principles. First, a properly constructed global index series must fully capture the investable equity opportunity set. In order to do so, it should include large-, mid-, and small-cap companies, incorporate minimum size and liquidity requirements, and be float adjusted so that it only includes shares available for purchase. Second, it should utilize a modular, building block approach that allows the global opportunity set to be decomposed into subsets without gaps or overlaps. Last but not least, it should apply a consistent methodology across markets and have continuity in its approach over time. These principles are critical to ensuring a fair and robust benchmark that can be utilized by market participants to support key aspects of the investment process such as performance measurement, asset allocation, and index replication.
Established in 1989, the S&P Global BMI (Broad Market Index) Series pioneered these core benchmarking principles. Ahead of its time in many respects, the S&P Global BMI lays claim to a number of important firsts in the global indexing industry; the most important of these being that it was the first to incorporate float adjustment and to include large-, mid-, and small-cap companies in a single modular global benchmark. As a result, the S&P Global BMI is used by some of the world’s largest and most sophisticated asset managers and asset owners, who value it as a comprehensive and trusted data set.
In this paper, we will cover the following major points.
- With more than 30 years of seamless history, the S&P Global BMI provides a consistent universe for historical market analysis and back-testing investment strategies.
- Over the years, other major global equity indices have converged to follow the S&P Global BMI framework—in particular its float adjustment and modular inclusion of large-, mid-, and small-cap securities in a single index series.
- The S&P Global BMI’s deep small-cap segment provides the most comprehensive measure of global small-cap securities.
- Differing country classifications for South Korea among major index providers may lead to meaningfully different representations of the emerging market opportunity set.
- Other competitors’ indices, such as MSCI EAFE, may inadvertently create a gap in coverage by excluding Canadian securities. An alternative, such as the S&P Developed ex-U.S. BMI, eliminates that gap.
