FactSet asks FTSE, how insulated are domestic indices from global effects?

In FactSet's most recent podcast, we ask Andy Harvell, Head of Quantitative Indices at FTSE Group, how index providers like FTSE avoid having the influence of foreign countries in what are intended to be domestic indices.  

As Andy explains, FTSE offers indices that exclude multinationals to deal with just these influences. However, in indices without these exclusions, the presence of multinational companies may create surprising consequences for investors and can increase the overall risk,

“One of the things that investors don’t often realize when they’re buy into the FTSE 100 whether by options, ETFs, or whatever, they’re actually now buying into currency risk and also geopolitical risk…. In 1984 when the FTSE 100 was started obviously currency risk and geopolitical risk didn’t really come into it. Nowadays we’re influenced by many more factors, not just what happens in the U.K.”

In addition to addressing the challenges of true domestic investing in a global economy, Andy also discusses some of the sectors that have seen the most fluctuation in their inclusion of the FTSE 100, in terms of companies who have lost their listings. In addition, he discusses which sectors have a stronger multinational focus.

Subscribe to FactSet's podcast to hear more details on a sector-based breakdown of U.K. market performance, as well as Andy's thoughts on some of the weaker sectors. You can also listen to the podcast on the web.

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