Get Indexology® Blog updates via email.

In This List

Industrial Commodities Benefit from Hopeful COVID-19 Vaccine News

Moonshots: Catching Lightning in a Bottle?

How Is the ESG Discussion Changing for Advisors?

Using Index Data to Inform Investment Strategies

Is South Korea Crowding Your Emerging Markets Allocation?

Industrial Commodities Benefit from Hopeful COVID-19 Vaccine News

Contributor Image
Fiona Boal

Managing Director, Global Head of Equities

S&P Dow Jones Indices

November proved to be a good month for risk assets, including commodities. The headline S&P GSCI rose 12.0%, outperforming the S&P 500®, which gained 10.8%. Promising developments on the COVID-19 vaccine front and the U.S. election outcome rewarded risk assets such as energy and industrial metals, while safe-haven assets like gold lost some luster.

The petroleum complex benefited from the prospect of a revival in demand should COVID-19 vaccines allow travel, transport, and other business activities to resume in the first few months of 2021. The S&P GSCI Petroleum gained 25.1%, though the recovery in prices started from a low and pessimistic base, with the index still down 49.9% YTD. On the last day of the month, OPEC+ postponed talks on oil output levels to Dec. 3, 2020, citing a lack of consensus between members regarding the proposed easing of production cuts starting January 2021.

The S&P GSCI Industrial Metals rose 11.1% in November, with all components contributing positive performance. The S&P GSCI Lead paved the way, up 13.6%, hitting a one-year high. This magnitude is unusual, given it is typically the least volatile of the industrial metals, but reflects an appetite for assets sensitive to economic growth prospects. The S&P GSCI Iron Ore rose 14.6% on the back of strong demand from Asia. The other red metal, S&P GSCI Copper, rose 12.8% to its highest level since May 2013. Positive prospects for renewable energy and electric vehicles, encouraging COVID-19 vaccine news, and China’s factory utilization rates’ rapid expansion provided an impetus for the red metal to move higher.

One casualty of the rush to risk in November was gold; the S&P GSCI Gold fell 5.6% and ended the month near a five-month low. While flows into physically backed ETFs remained positive, the 20.3 metric tons added in October was the smallest monthly increase since December 2019, reflecting a cooling in investor interest in safe-haven assets.

The S&P GSCI Soybeans continued its strong performance for the quarter by rising 10.6% in November. Brazil made a rare purchase of soybeans from the U.S. due to domestic supplies diminishing after making large sales to China. Cocoa and coffee prices both rose by double digits in November. Cocoa prices more than recovered from last month’s slump, with the S&P GSCI Cocoa jumping 18.8% on the back of Hershey sourcing a large volume of beans from the futures market instead of physical sellers. The S&P GSCI Coffee rose 15.2% following fears of adverse weather in Brazil and Central America.

The posts on this blog are opinions, not advice. Please read our Disclaimers.

Moonshots: Catching Lightning in a Bottle?

Contributor Image
Adam Gould

Senior Director, Research and Quantitative Strategist, S&P Kensho Indices

S&P Dow Jones Indices

We introduced the S&P Kensho Moonshots Index (the Moonshots index) and its constituent next-generation innovators in our previous blog. An express intent of the index is to identify innovative companies early in their gestation, when the opportunities for rapid growth may be higher. In this blog, we examine how effective the index is at capturing that potential for higher early-stage growth, and how it stacks up against more established innovators, as reflected in market returns.

To identify established innovators, we constructed a comparative portfolio made up of companies drawn from the selection universe used by the Moonshots index, whose market capitalization exceeded the maximum threshold at each rebalance, but whose Early-Stage Innovation score would have qualified for inclusion (Established Innovators—see the methodology document for more info).

The market consistently rewarded the Moonshots index over the Established Innovators on an annualized return basis over one-, three-, and five-year periods (see Exhibit 1). These findings suggest that the market attaches a premium to the early-stage innovators identified by the Moonshots strategy.

Annualized returns can often mask periods of underperformance; however, Exhibit 2 shows how the Moonshots index consistently outperformed on a calendar year basis, with the only exceptions being 2015 and 2018, when the Established Innovators edged ahead.

It is also worth noting that, despite its focus on relatively smaller companies, the Moonshots index and the Established Innovators exhibited similar levels of volatility. The outperformance of the Moonshots index relative to the Established Innovators is therefore not a function of higher risk.

The magnitude of the Moonshots index’s historical outperformance relative to small- and mid-cap benchmarks on an annualized basis (see Exhibit 3) emphasizes how differentiated the index is from its similarly sized peers. In fact, during a time when small- and mid-cap companies generally underperformed their larger brethren, it is of particular interest that the Moonshots strategy is able to outpace both constituencies.

However, a review of calendar year relative performance (see Exhibit 4) suggests a more nuanced picture.

It highlights an important characteristic: accelerating outperformance as emerging exponential innovation gains traction.

Rapid developments in artificial intelligence, robotics and automation, ubiquitous connectivity (Internet of Things) and exponential processing power—together, the catalysts of the Fourth Industrial Revolution—as well as their application in innovations across the global economy, have greatly accelerated over the past few years. The pivot in the Moonshots index’s track record in 2017 from one of moderate underperformance to consistent and significant outperformance is aligned with the increase in investor awareness of these macro dynamics and an acceleration in the adoption of these underlying transformative technologies.

Today’s rapid pace of technological advancement means companies must commit to innovation in order to survive and thrive. The outperformance of the S&P Kensho Moonshots Index versus both established innovators and similarly sized peers suggests that it is successfully capturing the higher growth potential of these emerging leaders, or next-generation innovators.

The author would like to thank John van Moyland, Managing Director, Global Head of S&P Kensho Indices for his contributions to this blog.

The posts on this blog are opinions, not advice. Please read our Disclaimers.

How Is the ESG Discussion Changing for Advisors?

Contributor Image
Shaun Wurzbach

Managing Director, Head of Commercial Group (North America)

S&P Dow Jones Indices

In a recent webinar I moderated, Brie Williams of State Street Global Advisors joined me to discuss how environmental, social, and governance (ESG) data and investing are now at an important turning point. We ran out of time to answer all the questions we received, and this post follows “Why Now for ESG?” and answers two questions about how conversations on ESG can change and add value for an advisory or wealth management firm and to its clients.

Question: How does ESG stand out compared to other approaches like impact investing?

Brie Williams, State Street Global Advisors: ESG is more than just a “do-good” mentality. There is a no-compromise approach when it comes to investors’ performance expectations for ESG.

  • Industry and academic studies offer empirical evidence for potentially better long-term risk-adjusted returns, lower downside, and improved volatility in ESG strategies.1
  • The increasing number of ESG options reflect the diversity of investor objectives, including avoiding or reducing ESG risk, while seeking a measurable impact, in pursuit of better investment outcomes.
  • One-third of investors agree it’s possible to achieve market-rate returns investing in companies based on their social or environmental impact; more Millennials (55%) than Gen X (35%) and Boomers (24%) agree with this.2

 Question: My client hasn’t asked me about ESG.  So why should I bring ESG up?

Brie: Investors’ need for advice in ESG investing is the advisor’s opportunity to add value in a meaningful way.

  • Investors are signaling planned increases in allocation. 25% of U.S. investors say they are likely to increase their ESG investment allocation level over the next 24 months. Generationally and globally, 31% of Millennials and 23% of Gen X are more likely.3
  • In pursuit of better investment outcomes, advisors are viewed as instrumental: 75% of Millennials indicate it is important that advisors help with ESG—and Gen X isn’t too far behind them, with 63% of this client segment viewing the advisor’s role as key.4
  • Effective integration of ESG principles into a portfolio begins with a client-focused process—not a product-focused process. Our three-phased framework can help focus the ESG conversation with clients.
    1. Identify a clear entry point (investment objectives, ESG priorities, and market opportunities).
    2. Keep risk in perspective (investment outcome desired, allocation, and integration considerations).
    3. Take the long view (time horizon, intended impact, and defined success measures).

The 2010s were all about laying the groundwork for ESG investing through education and government regulation. The 2020s will be about renewed commitment and putting ESG investing into action, including:

  • Better data leading to better investment solutions, as well as continuous improvement of ESG reporting;
  • ESG sustainable investing is not just about values, but about managing risks, and to the extent that ESG is linked to long-term returns, it will likely be valuation-driven; and
  • Discovery and education with the individual investor to better understand their motivations and support their goals across the various stages of their ESG journey (as learners, adopters, and ultimately, leaders).




1 The Boston Consulting Group, “Total Societal Impact: A New Lens for Strategy,” Oct. 25, 2017.

2 State Street Global Advisors, “Individual Investors 2019 Study: A Global Survey on Consumer Sentiment, Purpose, and Behavior in Wealth Management,” 2019.

3 Ibid.

4 Ibid.

The posts on this blog are opinions, not advice. Please read our Disclaimers.

Using Index Data to Inform Investment Strategies

S&P DJI’s Tim Edwards explores how financial advisors can use index data, human behavior, and SPIVA® results to inform allocations and better understand assumptions about active fund performance.

The posts on this blog are opinions, not advice. Please read our Disclaimers.

Is South Korea Crowding Your Emerging Markets Allocation?

Contributor Image
John Welling

Director, Global Equity Indices

S&P Dow Jones Indices

Key to evaluating core international equity benchmarks is an understanding of the country exposures offered. Developed and emerging market country classification differences between index providers may lead to notable geographic exposure differences across market segments. One of the most meaningful instances of this involves South Korea, which S&P DJI has classified as a developed market since 2001, while MSCI continues to classify the country as an emerging market.1

In our latest blog in a series highlighting key features of the global equity benchmark landscape, we explore South Korea’s classification as a developed market and the impact of its inclusion within the MSCI Emerging Market indices.

South Korea’s Fit in the Developed Market Universe

S&P DJI annually conducts a complete review of all countries included in its global equity benchmarks. Similar to other index providers, this process involves an evaluation of markets by various economic and market accessibility criteria. S&P DJI has classified South Korea as a developed market since 2001 because of its high level of economic development, considerable size and liquidity, absence of significant foreign investment restrictions, and GDP per capita alignment with developed economies (see Exhibit 1). Over the years, S&P DJI has confirmed this classification through its annual country classification consultation process, which involves feedback from a wide range of market participants.

Viewed through the lens of company revenues on a geographic basis, the largest South Korean companies overwhelmingly gain revenues from developed economies. In comparison, the largest companies based in less-developed countries gain nearly all their revenues from other emerging economies. Therefore, the inclusion of South Korea in an emerging markets index leads to less underlying economic exposure to typically faster-growing emerging economies. A notable example of this phenomenon is Samsung Electronics, which is based in South Korea and derives approximately 59% of its revenue from developed markets and is the fourth largest position in MSCI Emerging Markets.

Crowding Out Less-Developed Countries   

While excluded from the S&P Emerging LargeMidCap, South Korea represents an outsized weight of 11.9% in MSCI Emerging Markets, potentially crowding out less-developed markets from the benchmark.

Since country exposure is a key driver of the risk and return of emerging market equities, it is imperative to fully understand your benchmark to ensure the exposure is consistent with the expected characteristics of emerging markets.

To learn more about the comprehensive coverage of the S&P Global BMI Index Series, see The S&P Global BMI: Providing Consistent Insights into Global Equity Markets since 1989.



1 FTSE promoted South Korea’s standing in 2009.

The posts on this blog are opinions, not advice. Please read our Disclaimers.