Harness Positive Momentum
Merrill Lynch RPM IndexTM
Modern Index Construction Seeking Broad Diversification
The RPM Index is designed to leverage principles used by the largest financial institutions – including diversification, positive momentum and risk control – to help generate consistent returns in good and bad market environments. Diversification starts with a group of global asset classes across equities, fixed income and real assets:1
- Domestic Equities
- International Equities
- Emerging Markets Equities
- Real Estate
The RPM Index applies a rules-based approach to eliminate emotion, bias and the need to time the markets. The asset classes are rebalanced each month to reduce risk and correlation while leveraging positive short-term momentum. The result is an index that seeks to provide a broader level of diversification.
Key Terms and Resources
CORRELATION – The price relationship between two asset classes. Asset classes with high correlation tend to move in the same direction. Asset classes with low correlation tend to move independently.
MOMENTUM – The tendency for assets with demonstrated short-term performance, positive or negative, to continue to perform. The RPM Index removes asset classes that have negative 12-month momentum.
RISK – Rapid price changes up or down increase the risk of short-term losses. Each month, the RPM Index is designed to allocate more to asset classes exhibiting lower risk and less to asset classes exhibiting higher risk. Daily risk control is applied, which seeks to further reduce risk.
A Monthly Rebalancing Process Leveraging Positive Momentum
The RPM Index evaluates and rebalances the six asset classes based on risk, correlation and momentum over the previous 12 months. The monthly rebalancing process is designed to help the RPM Index capitalize on short-term changes in the asset classes and provide the potential for more consistent performance.
The RPM Index also applies daily risk control designed to help further minimize the impact of rapid up or down movements in the asset classes. Allocations can be made daily between the monthly allocation described above and a cash account to further reduce risk.
Designed to Provide Consistent Returns Throughout Market Cycles
Over the last 16 years, the RPM Index would have produced 9.47%** higher returns than the S&P 500® Price Return Index with less than one-third of the volatility, as demonstrated by the relatively consistent movement of the blue line below.
Merrill Lynch RPM Index™ Performance
**Hypothetical Assumptions: $100 invested in the Merrill Lynch RPM Index™ and the S&P 500® Price Return Index from 3/28/02 to 12/31/18. The RPM Index was established on 3/1/16. Performance shown before this date for the Merrill Lynch RPM Index™ is back-tested by applying the index strategy, which was designed with the benefit of hindsight, to historical financial data. Back-tested performance is hypothetical and has been provided for informational purposes only. The S&P 500® Price Return Index results are actual performance for the full period. Past performance is not indicative of nor does it guarantee future performance. The foregoing performance information does not include any relevant costs, participation rates, or charges associated with the BCA suite of Fixed Indexed Annuities or any other financial product linked to the Merrill Lynch RPM Index or S&P 500® Price Return Index. For more information on the BCA suite of Fixed Indexed Annuities and performance with the RPM Index, ask your insurance professional for an illustration.
The Merrill Lynch RPM Index is available with all BCA 2.0 FIAs and Athene Velocity. Rates and product availability will vary by state and results may be higher or lower. See your insurance professional for detailed information.