As the indexing debate continues and anyone who isn’t a 50+ year old publishing company is questioned as to their motives and skill in developing indexes, Investor’s Business Daily has chosen to highlight Clear Indexes and our methodology in constructing the Clear Spin-Off Index. We applaud IBD for choosing our index as its featured ETF product. We think this reflects our belief that there are better ways to invest through indexes.
Before we began our investigation of the spin-off investment theme, we benefited by research written by academics at Penn State University: Cusatis et al., 1993 and Purdue University: McConnell et al., 2004. Then we read thorough coverage from consulting firm McKinsey: Anslinger et al., 1999, and then Wall Street firms Goldman Sachs: Stelmach et al., 2006 and Lehman Brothers: Dickson et al., 2006. All these studies support the investment thesis that spin-offs deliver investment performance.
It appears clear that such predecessors all drawing the same conclusions should be meaningful. Unfortunately we live in a world of sound bites, single messages and supposed professionals who keep their research a few feet wide and less than an inch deep. Today we were pleased that this article rose above the noise and delivered the simple yet compelling message about spin-offs.
The spin-off concept seems intuitive to us. Of course we were born of money management and not of publishing. We think in terms of liquidity, volatility, correlation to general indexes and, of course, performance.
Again, we applaud IBD for the ink and invite institutions, analysts, and especially the skeptics, to invest time with us and understand what we’re truly about. As Bob Dylan sings “don’t criticize what you don’t understand.” You may be very pleased with our process.
Disclosure: Mr. Corn is the founder and CEO of Clear Asset Management LLC.