CSI Axioma 300 Optimized Factor Indices Methodology
1. Index Name and Code
Code
Index Name
Abbreviation
H30125
CSI-Axioma 300 Optimized High Growth Index
Optimized Growth
H30126
CSI-Axioma 300 Optimized High Value Index
Optimized Value
H30127
CSI-Axioma 300 Optimized High Predicted Beta Index
Optimized High Beta
H30128
CSI-Axioma 300 Optimized Low Predicted Beta Index
Optimized Low Beta
H30129
CSI-Axioma 300 Optimized High Volatility Index
Optimized High Volatility
H30130
CSI-Axioma 300 Optimized Low Volatility Index
Optimized Low Volatility
2. Base Date and Base Index
The base date of CSI Axioma 300 Optimized Factor Indices are December 31,
2004. The base divisor of the index are the adjusted market-cap of all constituents as
of close of the base date. The base index is 1000.
3. Selection Method
3.1 Index Universe
The index universe is the constituents of CSI 300 index.
3.2 Index Target
CSI Axioma 300 Optimized Factor Indices are designed to select constituents
using optimized techniques and Axioma methodology that capture specific exposures
to targeted factors and neutralize exposure to other factors in a range.
Optimized High Growth index selects constituents that capture highest exposure
to Growth factor and neutralize exposure to other factors in a range. Growth factor is
plowback times ROE.
Optimized High Value index selects constituents that capture highest exposure to
Value factor and neutralize exposure to other factors in a range. Value factor is book
to price and calculated as the ratio common equity to average 20-day market
capitalization. .
Optimized High Predicted Beta or Low Predicted Beta indices select constituents
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that capture highest or lowest beta as predicted by the risk model and neutralize
exposure to other factors in a range. Predicted beta is different to traditional historical
beta and calculated by Axioma risk model.
Optimized High Volatility or Low Volatility indices select constituents that
capture highest or lowest exposure to Volatility and neutralize exposure to other
factors in a range. Volatility is calculated as the square root of the asset’s absolute
return averaged over the last 60-days divided by the cross sectional volatility of the
market.
3.3 Optimization process
3.3.1 Reference Index
Number of names allowed. Names are at the Highest or Lowest Scored
Index
Weighting Scheme
of Reference Index
Reference Index Number
of Names
Max. Allowable Names for
Optimization
High Value
High Growth
High Predicted
Beta
Low Predicted
Beta
High Volatility
Low Volatility
Equal Weighted
60(20% of CSI 300)
150(50% of CSI 300)
3.3.2 Optimization Objective
Minimize tracking error (AXCN-MH) to the Reference Portfolio
3.3.3 Holdable Universe:The top/bottom 150 names in the CSI 300
3.3.4 Constraints:
 Long-only, fully invested (no cash)
 For each stock, max bound: Max(Reference Wgt, Min(2%, 10% of ADV))
 For each stock, hold at least: 0.5 bps
 Max asset trade = 10% of ADV.
 Max turnover
Rebalance Date
January 1
April 1
July 1
October 1
MAX. Round Trip Turnover
66.70%
33.30%
66.70%
33.30%
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

Active exposure to style factors in risk model within +/- 0.25 standard
deviations, compared with CSI 300
Active exposure to sectors within 5%, compared with CSI 300
4. Index Calculation
CSI Axioma 300 Optimized Factor indices are calculated using a Paasche
weighted composite price index formula, the formula is:
Current index 
Current adjusted market cap of constituents
1000
Base
period
Adjusted market cap = ∑(Price× Adjusted No. of shares× weight adjusted
factor).The calculation of adjusted no. of shares is the same with that of CSI 300. The
weight adjusted factor is calculated by Axioma risk model.
5. Index Maintenance
The same with that of CSI 300 index.
6. Constituents Adjustment
CSI Axioma 300 optimized factor Indices will be rebalanced quarterly. The
constituents and weight adjustment are implemented on the first trading day of quarter
each year. Temporary adjustment can be made under certain circumstances if
necessary.
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