INTRODUCTION
Introduced on Oct. 24, 2013, the S&P Colombia Select Index is one of the leading benchmarks measuring the Colombian equity market. Designed to track the largest and most liquid Colombian stocks, this index was authorized by the Colombian Ministry of Finance and Public Credit (Ministerio de Hacienda y Crédito Público [MHCP]) in 2015 to sit alongside the MSCI COLCAP Index as the only two domestic equity components of the Índice Agregado de Renta Variable Local (IARVL). The IARVL is a composite index calculated by the MHCP to track the performance of the Colombian equity market and serve as a benchmark for private and public institutional portfolios, including those of pension funds.
While the S&P Colombia Select Index and MSCI COLCAP Index share the objective of measuring the performance of the local equities market, the S&P Colombia Select Index’s inclusion of single-company and sector caps results in a more diversified measure of the Colombian equities market. Despite the larger number of securities in the MSCI COLCAP Index, it is a more concentrated index at the company and sector level, compared with the S&P Colombia Select Index. These variations in exposure have also led to meaningful differences in risk/return profiles historically, with the S&P Colombia Select Index outperforming the MSCI COLCAP Index over the mid and long term.
METHODOLOGY OVERVIEW
The S&P Colombia Select Index methodology is composed of four sections: the underlying universe, eligibility criteria, index construction, and index maintenance.
A Closer Look at the Universe
The S&P Colombia Select Index methodology starts with a universe composed of the S&P Colombia BMI, a sub-index of the S&P Global BMI, which has eligibility requirements that must be met by all emerging market companies. Additionally, the universe can be expanded to include Colombian companies trading on the Colombia Stock Exchange (Bolsa de Valores de Colombia [BVC]) that meet the eligibility criteria of the S&P Colombia Select Index, so that it contains at least 14 stocks.
