RMI® YTD Performance

Our current RMI® models cover the component stocks from the US 500, Canada 350, UK 100 and Europe 50. Two RMI models are listed on NASDAQ and 15 RMI models are listed on Bloomberg (ORMI <GO>). RMI Canada 15 is the only Active model, which selects 15 stocks from the TSX 350 universe. All the other RMI models are passive and are designed to track their respective benchmarks. The report below discusses RMI performance compared to the benchmarks for year to date (YTD) and since 2010. The analysis also compares annualized volatility and excess annualized returns.
Barring Europe 50, all the other three regions US, Canada, and the UK delivered positive YTD results. RMI models outperformed their respective benchmarks (Chart 1). Despite Brexit, the UK 100 benchmark was positive for the year, while Europe 50 was negative -9% as of July close.
The RMI is based on a universal framework which considers markets as natural dynamic systems with both momentum and reversion forces acting across different holding periods. RMI not only captures benefits of both growth and value factors in a dynamic, effective construct but also diversifies portfolio risk by generating a different return pattern by diversifying style factor. The RMI models are rebalanced every two years.
Chart 2 illustrates the annualized returns for various regional groups like North America, and UK 100 and Europe 50. Though the average annualized excess returns since 2010 are above 4%, 2016 started with a positive excess return of 2% (Chart 3). The UK RMI models delivered 3% excess returns despite Brexit in 2016. The average excess returns are above 5%.
Chart 4 plots the annualized volatilities for RMI and their benchmarks. RMI has a similar component turnover to the benchmark and has low tracking error. RMI Europe 50 has been a positive surprise for us delivering nearly 5% excess returns at negative excess volatility.
Canada remained a top market for both RMI Passive and RMI Active, while the US models had the least divergence between excess returns for 2016 and average excess returns over the last 10 years.
Next quarter, we plan to release models on Indian blue chip 50 stocks, Indian sectors, commodities and global Industrials.