Salt Defensive Industry Index

Targets industry groups with historically higher average returns during periods of economic contraction

Overview

The Salt Defensive Industry Index provides exposure to US industry groups that historically outperformed when key economic indicators are trending downwards, indicating contraction in the economic cycle. Based on analysis of over 94 years of industry returns to cover multiple economic cycles, the index maps industry groups from Morningstar’s Global Equity Classification System (GECS) to Standard Industrial Classification (SIC) codes maintained by the US government over many decades. The Index is designed to go beyond broad sectors in seeking to identify the individual industries in the economy with the potential to outperform during recessionary periods.

The Index begins with the top 1000 largest US stocks, mapping each to its GECS classification and then estimating its risk using Salt’s proprietary truBeta® forecast of market sensitivity (beta). Using the mapping of GECS to SIC codes, the Index selects the 10 industry groups with the highest average returns during months in which economic indicators were decreasing over a long historical sample period (1963-1999). Each stock is then weighted inversely proportionate by risk relative to its industry and then each industry inversely by risk relative to the market, giving the Defensive Industry Index less sensitivity to market moves in a cyclical contraction. The Index is rebalanced quarterly to its risk weights but maintains exposure to the same 10 industry groups.

Key Facts

Ticker SFDEFI
Type Total Return
Weighting Inverse Beta
Rebalancing Quarterly
Base Date Dec 31, 1999
Inception Date Feb 4, 2021
Calculation Agent Salt Financial Indices LLC

Performance