92 INSTITUTIONAL FUNDS TABLE 8.

1 Desirable and Undesirable Characteristics of Indexes Desirable Undesirable Rule based Ad hoc revisions Broad Narrow Float weighted Market cap weighted Consistent data availability Poor data availability Comparable across countries Different methodologies for each country index Widely used by investors Not used by investors investable global equity portfolio, we seek indexes that provide consistent data across countries, have sufficiently long price history, and are widely used by global investors. In addition, we believe that having an index that is constructed in a systematic manner with the same set of rules and principles applied to all countries is beneficial. Consistency and comparability of data are lost if security inclusion rules are different for each country index. It is also imperative that security weights be adjusted to reflect the true, free floated market capitalization that is available to global investors. In addition, we seek an index that has a broad rather than narrow representation of each equity market. We can apply these characteristics in evaluating three alternatives that we have identified to represent the global equity portion of the market portfolio. These alternatives are either to use MSCI ACWI or SSBGEI index families, or to construct a portfolio of local indexes (such as the Russell 3000 for the United States, Nikkei 225 for Japan, and FTSE 300 for the United Kingdom). Note that since the FTSE All World indexes are mostly used by European investors and we have a global investor in mind, we are focusing our attention on the MSCI ACWI and SSBGEI. Salomon Smith Barney Global Equity Index According to its creators, the objective of the SSBGEI is "to provide the definitive global equity benchmark."1 The index does so by implementing a top-down index methodology, which is based on a set of simple rules and leads to a complete and unbiased construction. The main rule, which dictates company inclusion in the index, states that all companies with total available market capitalization greater than $100 million will be included. This methodology assures an objective representation and eliminates unintended biases and distortions that may be caused by stock selection. Also, the proportion of each ]See Nadbielny, Thomas S., Michael Sullivan, and Marc De Luise, "Introducing the Salomon Brothers World Equity Index," Salomon Brothers, June 1994, and Sullivan, Michael, Marc De Luise, Kevin Sung, and Patrick A. Kerr, "Global Stock Market Review: May 2002," Salomon Smith Barney Equity Research: Global Equity Index, June 13, 2002.

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