Singapore / Hong Kong

The Royal Bank of Scotland plc (RBS) has partnered with legendary Wall Street investorJoel Greenblatt, managing partner of Gotham Capital International (Gotham) to develop an innovative and transparent family of indices. The indices are designed to enable investors to access the fundamental value investing principles espoused in his best-seller The Little Book That Beats the Market using Gotham’s enhanced accounting data.

The Gotham Enhanced Value Index (GEVI) was developed by Gotham and designed to be traded by RBS through an exclusive partnership and is independently calculated by Standard & Poor’s.  The GEVI is a rules-based, long-only equity index comprised of a diversified basket of up to 25 highly liquid shares across a variety of business and industry sectors in the United States.  The GEVI aims to represent an investment in shares that exhibit a high return on capital employed and high earnings ratio, the two-factor fundamental model identified in the Little Book That Beats The Market, a formula Mr. Greenblatt often refers to as the “Magic Formula for investing”.

Garry Frenklah, Head of Equity Derivatives & PIP Sales, South Asia, said: “At RBS, we strive to bring return-enhancing innovative investment ideas and products to our clients.  We are delighted to collaborate with Joel Greenblatt and Gotham Capital International in bringing the GEVI series to Asian investors.  As stock markets are showing signs of gradual recovery, investors are looking for non-speculative exposure to equities with long-term growth potential.  The GEVI series offers investors a robust and transparent investment tool for generating exceptional simulated performance through value investing strategy.”

Simulated backtesting has shown that between the end of August 1999 and the end of August 2009, the Gotham US Enhanced Value Index – Total Return (Bloomberg: GEVIUSA Index) delivered an annualised performance of 18.7%, compared to the S&P 500® Index performance of -0.8% and Berkshire Hathaway’s performance of 5.1%, with attractive risk reward characteristics.[1]  The GEVI offers daily liquidity and transparency to investors via certificate and structured note format offered by RBS in Europe, the Middle East, Asia and Latin America.

The screening process of the Indices is independently carried out by Gotham, who employs a highly qualified team of accounting analysts which review company filings and announcements, making accounting adjustments with the aim of ensuring that all company data is comparable.  Following this review, Gotham calculates the return on capital employed and earnings yield of each company to identify companies with profit potential whose shares are currently undervalued by the market.

Joel Greenblatt, managing partner of Gotham, said: "We are delighted to partner with RBS, one of the world leaders in index construction, to launch a new index that seeks to systematically purchase good quality companies when they are available at bargain prices. It is our belief that this simple, logical and consistent quantitative approach has significant advantages over traditional indices."

A global version will also be launched by the end of this year, comprising shares from a selected universe of securities in theAmericas,Asia,Australia andEurope, as well as an international version, which will include the shares from non-US AmericasAsia/Australiaand Europe.  

Both the global and the international versions are designed to opportunistically shift allocations to the most attractive investments globally, while incorporating regional and country concentration limits based upon Gross Domestic Product to ensure that the indices maintain a degree of balanced exposure.

RBS is a global leader in index creation, with in excess of 300 award-winning innovative thematic, emerging market and commodity indices, some of which have won awards. RBS frequently works with partners to deliver pioneering indices to our clients. RBS has a robust and scalable index platform, enabling the bank to produce indices that meet the highest industry standards.  The GEVI family of indices is a new addition to RBS’s thematic index platform.  In June, RBS partnered with Victor Sperandeo, known as “Trader Vic”, CEO of Alpha Financial Technologies LLC, to launch a trend-following, managed futures index designed to offer investors absolute performance while moderating volatility regardless of market direction..   

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Press Enquiries:          

Yuk Min Hui                             

Tel : +852 2700 5664

Email: yuk.min.hui@rbs.com

Ping Ping Tan

Tel : +65 6518 8497

Email: ping.p.tan@rbs.com

Notes for Editor:

The Royal Bank of Scotland Group

The RBS group is a large international banking and financial services company. Headquartered in Edinburgh, the Group operates in the United Kingdom, Europe, the Americas and Asia, serving more than 40 million customers. The Group provides a wide range of products and services to personal, commercial and large corporate and institutional customers through its two principal subsidiaries, The Royal Bank of Scotland and NatWest, as well as through a number of other well known brands including, Citizens, Ulster Bank, Coutts, Direct Line and Churchill.

Joel Greenblatt

Joel Greenblatt, managing partner of Gotham, is the former Chairman of the Board (1994-1995) and a former board member (1994-2000) of Alliant Techsystems, a NYSE-listed aerospace and defence contractor. He currently sits on the Investment Committee of both the University of Pennsylvania and the UJA-Federation. Since 1996, Mr. Greenblatt has been a professor on the adjunct faculty of Columbia Business School where he teaches value and special situation investments. He is the author of the Business Week’s bestselling You Can Be A Share Market Genius(Simon & Schuster, 1997) and The New York Times bestsellerThe Little Book That Beats The Market (Wiley, 2005). Mr. Greenblatt founded Gotham Capital in 1985 as a hedge fund open to external investment. Gotham Capital earned annual gross compounded returns of 50% (after expenses, before incentive fee) from 1985 until it returned all outside limited partner capital at the end of 1994, generating cumulative gross returns of 5,197% vs. 154% for the S&P 500 during this period.   After its success over 10 years and its return of all of its limited partners’ capital, Gotham Capital has functioned as a private investment fund focused on managing the capital of its principals: Mr. Greenblatt, Robert Goldstein and John Petry.  Gotham Capital International LLC is a wholly owned subsidiary of PWQRS, LP which holds certain intellectual property associated with the quantitative trading formulas used in the Gotham Enhanced Value family of indices.