5 - Indexing the IPO sector with IPOXTM Indices

Abstract

Global issuing activity in initial public offerings (IPOs) has risen over the past few years. This is being driven by the favorable long-run performance of the average US IPO. Furthermore, there have been fundamental shifts in the profile of US IPO companies with older and more mature companies going public. This development has also been associated with an increase in public scrutiny towards IPO companies following changes in the regulatory framework associated with Sarbanes-–Oxley. For investment professionals, the importance of gaining timely exposure into IPOs is increasingly being recognized. In response to the fundamental developments affecting the average IPO, the family of IPOX Indices was created as Indices for value of issues of new shares, which tracks the investment performance of IPOs issued in the United States during a predetermined time in aftermarket trading. The index technology facilitates the investment decision, trading process, and analysis of risk in the IPO sector with respect to the unique institutional and market influences inherent in short- and long-run IPO aftermarket trading. Using the IPOX Indices technology also underlines the portfolio benefits of IPO indexation and average IPO investing. It aims to become the leading benchmark against which to measure aftermarket IPO performance.