SANTA MONICA, Calif., Jan. 25, 1999 (PRIMEZONE)-- Gary Gensler, U.S. Treasury Assistant Secretary, reportedly told Congress last week that the President's proposal envisions that the social security funds to be invested in the stock market would be invested in a very broad market index, such as the Wilshire 5000. Below is background information about the Wilshire 5000 and indexing that you might find useful. Please call if you'd like more information or would like to speak to a Wilshire indexing expert for commentary.
What is the Wilshire 5000 Index?: * Considered the best measure of the U.S. stock market. * Includes all stocks traded on the NYSE, AMEX and NASDAQ with available price information. * Currently, 7,206 stocks with a market cap of $12.6 trillion (1/26/98). Calculated since 1974. Who is Wilshire Associates?: * The nation's largest provider of investment advice to public institutions in the U.S. and one of the leading providers of portfolio analytics used for risk management, asset allocation and performance measurement. * A pioneer in indexes and index investing, including the creation of the first comprehensive small cap index (WSX) and the Wilshire 5000. * Known for its quantitative skills, which are used in its asset management and consulting services. What is Indexing:
Index investing calls for investing in stocks in an index or a representative sample. The S&P 500 index is one of the most common indexes, although the Wilshire 5000 is considered the best measure of the entire U.S. stock market. Index investing provides advantages over traditional "actively" managed funds, including market performance, low fees, diversification and low portfolio turnover.
Wilshire's Views:
As the largest investment advisor to public pension funds in the U.S. and the first to recommend indexing to clients in 1981, here are Wilshire's views on investing social security funds in the stock market:
-- Investing in the stock market would provide social security funds superior
inflation protection over bonds or treasuries. It could also reduce funding
costs and possibly enhance benefits to retirees.
-- Stock investing raises an important question: would it alter the risk and
return profile of the US stock market? We believe that, if the Treasury's
investment comprises 4% of the market over the 15 years, as indicated, it would
probably not alter the characteristics of the market.
-- It would be important that the Administration maintain an asset allocation
strategy over the long-term. Any aggressive changes could be a destabilizing
factor in the markets.
-- Lastly, we believe that if the social security funds are invested using an
index strategy, a broad market strategy would be best. Investing in large cap
stocks, for instance, could distort the performance of these stocks.
What Experts Have Said About the Wilshire 5000 Index:
-- "The best representation available of the entire U.S. market," Princeton
economics professor Burton Malkiel in his book, A Random Walk Down Wall Street
-- "The best benchmark" for active managers. "The sooner we use this more
realistic standard as the most appropriate benchmark for active managers, the
better it will be for the industry and the investors we serve." John Bogle, the
founder of Vanguard Group, at an industry conference, December 1998.
-- The S&P 500 "is just too narrow an index for diversified funds to measure
themselves against." William Dougherty, head of Kanon Bloch Carre, a Boston-
based research firm.
CONTACT: Jennifer Openshaw
Director, Investment Services
Wilshire Associates
(310) 260-6662