Index and ETF providers look to alternative weighting to avoid the 'concentrations and trend following bias' of market-cap weighted indexes

Alternative weighted bond indexes may "not generate excess returns", but offer investors a new way to look at sovereign risk in the context of their bond portfolios, say market particpants

Barclays Capital’s alternative weight bond indexes look to fiscal strength to adjust country weights

Investors who build their portfolios around bonds and equities are looking to diversify from market cap weighted indexes when looking at sovereign risk, market participants say.

“Traditionally, index providers have mostly used market cap weightings,” says Jamie Farmer, executive director at Dow Jones Indexes in London. “However, we’re noticing an increasing interest in alternative weightings in bond indexes as well as equity indexes.”

The index provider has recently started to add new dimensions