Overview | Largecap Indexes | Smallcap Indexes

Barra Canada Smallcap Growth & Value Indexes

The Barra Canada Growth & Value Indexes were discontinued on March 31, 2008. The final update for this product is for the month ending March 31, 2008. For further information, please contact us.

Universe Selection
Smallcap portfolio construction begins with the selection of assets that constitute the Barra Canada Smallcap Index (analogous to the 200 large-capitalization issues) from which the Smallcap Growth and Value Indexes will be drawn^*.

Preliminary full rebalances of the Smallcap Index occur in January and July. As with the Largecap portfolios, the selection of assets begins with the selection of single issues from each issuer of ordinary equity (no preferred shares or unit trusts). Assets must also satisfy the following criteria: (1) they cannot come from issuers held in the Largecap Indexes (This check is made based on the first six digits of each asset's CUSIP which identify the asset's issuer. For details, see the CUSIP Bureau's web site.); (2) they must have issue capitalizations smaller than the smallest in the Largecap Indexes; (3) they must have prices greater than or equal to one Canadian dollar. Of the allowable issues, the 300 with the largest issue capitalizations are selected as primary candidates for addition to the existing Smallcap Index. The lowest issue capitalization in this group is recorded as the Smallcap Cutoff. Lower-capitalization assets are kept as secondary addition candidates.

To improve continuity in the constituents of the Smallcap Index, a second group of candidates is also prepared from the list of assets that were candidates for addition in the rebalance six months earlier. From this group, certain assets are removed: those sharing issuers with those present in the current Largecap Indexes; those without current price and capitalization data; those with issue capitalizations greater than 1.2 times the lowest issue capitalization in the Largecap Indexes and those with capitalizations less than 0.8 times the Smallcap Cutoff; and those with prices less than one half Canadian dollar. The remaining assets form the foundation of the new Smallcap Index. The highest capitalization assets from the primary additions group are added to this foundation to bring the total number of issues to 300. This is the preliminary Smallcap Index membership list. Unused addition candidates are saved for possible inclusion in monthly maintenance rebalances to replace assets that are removed.

Classifying Assets as Value or Growth
the construction of growth and value sections of the Smallcap Index closely parallels the process for the Largecap Indexes.

The preliminary small-capitalization assets are ranked by book-to-price and by yield. (Starting with the February 2004 full rebalance, quarterly book values are used when available; prior to this, annual data were used.) A Composite Value Ranking is made for each asset from a weighted average of these two rankings. To construct the Smallcap Value Index, we draw from the preliminary universe, highest ranked assets first, until half of the capitalization of the preliminary universe is reached. The Smallcap Growth Index contains the remaining assets. The largest Composite Value Ranking in the preliminary Smallcap Value Index is recorded as the Smallcap Value Cutoff.

Index Maintenance
Maintenance rebalances occur every month. The rebalance begins with the previous month's Smallcap Index or, in February and August, the preliminary Smallcap Index member list prepared a month earlier. We remove assets without price or capitalization data from the list, as we do assets with issuers that appear in the current Largecap Indexes. We similarly screen assets that are candidates for addition, removing assets with issuers already in the screened membership list, based on their CUSIPs. Those with the highest issue capitalizations are used to supplement the screened membership list and bring the number in the final Smallcap Index to 300. Share numbers in the Smallcap Index are derived directly from the issue capitalization and share price.

Value and growth assignments are made every month as in the Largecap Indexes. Specifically, except in February and August (when full rebalances take place), assignments are inherited from the preceding month's Smallcap Growth and Value Indexes. We compare new assets' Composite Value Ranking (based on current book-to-price and yield data) with the Smallcap Value Cutoff and assign them to value or growth.

Each day, dead assets are removed and share numbers are adjusted for splits.

*Income trusts which are constituents of the TSX Composite, not selected for inclusion in the Barra Canada Largecap Growth & Value Indexes, will be eligible for inclusion in the Barra Canada Smallcap Growth & Value Indexes. No other income trusts, funds of income trusts or limited partnerships will be eligible for inclusion.