WO2006089565A2 - Financial portfolio enhancement delivery system with corporate governance driven shareholder value inputs and method for achieving same - Google Patents

Description

FINANCIAL PORTFOLIO ENHANCEMENT DELIVERY SYSTEM WITH CORPORATE GOVERNANCE DRIVEN SHAREHOLDER VALUE INPUTS AND METHOD FOR

ACHIEVING SAME

FIELD OF INVENTION

[0001] The present invention relates generally to managing financial portfolios, and more particularly, the present invention relates to the enhancement of index tracker quant equity portfolios with a comprehensive method relying on a congruent blend of corporate governance driven shareholder value inputs and other financial performance criteria.

BACKGROUND OF THE INVENTION

[0002] At the start of the third millennium, corporate governance emerges as a major global issue, primarily because of its reported significant impact on retirement benefits. Anglo-Saxon pension funds, mutual funds and insurance companies were initially at the forefront of the corporate governance movement. The latter is now gradually spreading to other parts of the world, including countries which are either replacing or stretching their pay-as-you-go retirement schemes with funded equity schemes. [0003] Reform on governance can no longer be viewed as a national or local issue for any corporation: globalization has brought in its wake the need for international coordination of efforts to ensure that growth is sustained and shared, sustained in that it is robust and can withstand shocks and shared in that it brings prosperity to the many, rather than the few.

1.0 Detailed Background Overview

1.1 Fast Growing Retirement Schemes

[0004] Global pension fund assets are reported to have grown, from less than US$1 trillion during the seventies, to over US$15 trillion worldwide at the turn of the century. Their growth is projected to be significantly higher than any other major investment group (e.g. mutual funds, insurers, or individual investors), following the gradual adoption of funded pension fund schemes. The latter tend to be invested proportionately more in equities today than in the past (e.g. up to 50 %, or more, of the assets of the funds).

1.2 More Powerful Institutional Investors

[0005] The huge equity stakes of the leading Anglo-American pension funds has prevented them from relying on the traditional "Wall Street Walk" approach (i.e. selling under-performing stock), particularly for the index tracker segment of their equity portfolios (which may represent today as much as 80 % of the latter). Certain pension fund officials have therefore felt compelled to intervene in under-performing companies, so as to safeguard the retirement nest eggs of their beneficiaries. Their activism initiated the global corporate governance movement.

1.3 Higher Awareness of the Benefits of Corporate Governance Driven Shareholder Value Enhancement Practices

[0006] The aforesaid global corporate governance movement contributed to raise the global awareness of the need for more adequate corporate governance practices. This awareness is more prevalent throughout the North Atlantic geographical area (Australasia is culturally included in this area) than in the rest of the world, as both the continental European and Anglo-American corporate governance cultures are gradually converging. Indeed, a significant number of continental European corporate officers now claim to have been converted to the benefits of adequate corporate governance. However, it is not impossible to foresee that other areas of the world (e.g. Brazil, China and Japan) will join forces with the North Atlantic countries to promote adequate corporate governance. Some 100 national corporate governance codes, the Organization for Economic Cooperation and Development ("OECD") "Principles of Corporate Governance", and the International Corporate Governance Network ("ICGN") "Global Corporate Governance Principles" also contribute to raise such a higher awareness, which favors the gradual adoption of adequate corporate governance and shareholder value enhancement practices around the world.

[0007] McKinsey & Co. completed an Investor Opinion Survey carried out from October 1999 until April 2000. Undertaken in cooperation with bom the World Bank and Institutional Investor's regional institutes, the survey gathered responses from over 200 institutional investors, who together manage approximately US$3.25 trillion. Key findings include the following:

• Three-quarters of investors say board practices are at least as important as financial performance when evaluating companies for investment.

• Over 80 percent of investors say they would pay more for a well-governed company than for a poorly governed company with comparable financials. (A well-governed company was defined as having a majority of outside directors with no management ties; holding formal evaluations of directors; and being responsive to investor requests for information on governance issues. In addition, directors held significant stockholdings in the company, and a large proportion of directors' pay came in the form of stock options.) • The actual premium investors say they would be willing to pay differs by country. Investors say they would pay 18 percent more for the shares of a well-governed company in the UK, 22 percent in Italy, and 27 percent for one in Venezuela or Indonesia.

[0008] The premium appears correlated with the perception of predominant governance standards, with investors willing to pay a higher premium where disclosure or shareholder rights are main concerns. McKinsey concludes that "if companies could capture but a small proportion of the governance premium that is apparently available, they would create significant shareholder value. High governance standards will prove essential to attracting and retaining investors in globalized capital markets, while failure to reform is likely to hinder those companies with global ambitions."

1.4 More Efficient Performance Measurements

[0009] More efficient corporate performance monitoring tools are emerging, relying for instance on ratios measuring the returns on net assets in excess of the cost of capital (e.g. Stern Stewart Co.'s Economic Value Added EVA ). Portfolio quant risk management techniques are under development. These techniques combine strong relative performance with relatively low risk levels.

1.5 Correlation Between Corporate Governance and Financial Returns

[0010] The studies carried out by the Council of Institutional Investors, Wilshire Associates for CaIPERS, Robert Monks at Lens, Ira Milstein with Paul MacAvoy, among others, have demonstrated the positive effect of certain adequate corporate governance practices on financial returns. They have therefore foreshadowed the hint of a possible large-scale positive impact on financial returns of a congruent blend of corporate governance driven shareholder value inputs, which is systematically demonstrated for the first time by the present portfolio enhancement method.

1.6 Growing Interest for Index Tracker Equity Funds

[0011] As previously stated, leading Anglo-American pension funds tend to rely on index tracker funds for often as much as 80% of their equity investments. This strategy is justified by the fact that stock indexes tend to outperform active managers. Indeed, according to Standard & Poor's Micropal, from 1995 to 1999 for instance, the Dow Jones Euro Stoxx 50 and the MSCI Europe have outperformed actively managed funds by respectively about 73 % and 43 %.

[0012] At the beginning of 1999, the World Bank teamed up with the OECD to set up the Global Corporate Governance Forum. The latter aims to address the issue of optimizing shareholder values, while meeting other stakeholder objectives, so as to achieve long-term sustained economic and social values.

1.7 Apparent Scarcity of Efficient Equity Index Tracker Enhancement Systems

[0013] Empirical observation indicates that it is difficult to develop an index tracker system capable of outperforming its benchmark over the long-term. The present invention attempts to fill that apparent gap. It stems from the research and development endeavors of the inventor to design a comprehensive model for enhancing index tracker quant equity portfolios. The inventor designed the first quant corporate governance and shareholder value driven multinational equity fund ever experimented in the world, i.e. ABF Europe Valeur Actionnariale, the performance of which is outlined in FIG. 3. This experiment provided valuable information for significantly improving the method of the present invention.

1.8 Roots of the Invention [0014] The roots of the invention actually stem from the decade long, self started "pro bono publico" endeavors of its inventor, to assemble major pension funds, and other institutional investors, in the framework of the ICGN. The initial idea to set up the ICGN is reported to have been sketched since 1989 by the inventor, at various meetings held at the Association of British Insurers (ABI) in London, the California Public Employees Retirement System (CaIPERS) in Sacramento, the Council of Institutional Investors (CII) in Washington, DC, the College Retirement Equities Fund (TIAA- CREF) in New York, the National Association of Pension Funds (NAPF) in London, etc. The inventor contributed to organize several ICGN conferences, among others with the ABI and the Corporation of London, with ParisBourse, with the Deutsche Boerse, and with the New York Stock Exchange. The inventor also co-chaired the Working Group in charge of drafting the "Global Corporate Governance Principles" of the ICGN and was elected as Co-Chairman of the Board of Governors of the ICGN. In 2000, the assets held by the members of the ICGN were estimated to approach US$10 trillion. http://www.ICGN.org

1.9 Lack of Any Similar Equity Index Tracker Enhancement Patents

[0015] Previous attempts have been made to provide portfolio enhancement mechanisms that analyze certain criteria and invest in stocks based upon the analysis of the criteria such as described in United States Patent No. 5,819,238 to Fernholz (the '238 patent); U.S. Patent No. 5,978,778 to O'Shaughnessy (the '778 patent); U.S. Patent No. 6,003,018 to Michaud et at (the '018 patent); U.S. Patent No. 5,784,696 to Melnikoff et al. (the '696 patent); U.S. Patent No. 5,761,442 to Barr et al (the '442 patent); and U.S. Patent No. 5,132,899 to Fox (the '899 patent), each of which is incorporated herein by reference.

[0016] The '238 patent describes an apparatus and method for -automatically modifying a financial portfolio by calculating weights of index stocks and setting target proportion weights for each stock. Once the target proportion weights have been calculated, the portfolio is altered to reflect the target proportions.

[0017] The '778 patent describes a method of selecting corporate stocks for investment. The 778 patent uses different selection models, for selecting stocks for investment 1-1 through 2-9. This patent provides for selecting various stocks through the use of specific criteria including market capitalization, price-to-sales ratios and annual earnings.

[0018] The '018 patent describes a method for selecting the value of portfolio weight for each of a number of assets in an optimal portfolio by calculating a mean-variance frontier and indexing a set of portfolios located on the mean variance frontier. This process thereby creates indexed portfolios, which then allows resampling a plurality of simulations of input data consistent with the defined expected return and standard of deviation of return of specified assets. The method further provides for computing simulated mean variance efficient portfolios that establish a statistical mean for each mean variant efficient portfolio, thereby creating a multiplicity of statistical means that create a resampled efficient frontier. The method concludes by selecting weights of assets based upon specified risk objectives and investing funds accordingly.

[0019] The '696 patent describes a portfolio selector for selecting an investment portfolio from a library of assets based on investment risk and risk-adjusted return. The selector chooses a tentative portfolio from the library and determines a risk-adjusted return for the portfolio. The risk-adjusted return is computed by subtracting the average of multiple segment shortfalls from the average of multiple segment performances, over the same segments, based on analysis of market value data for the assets in the portfolio and for a baseline asset. The asset selection and computation is repeated until the risk-adjusted return of the portfolio satisfies criteria derived from performance data specific to an investor. A data storage medium encoded with instruction for performing the method is also provided.

[0020] The '442 patent describes a data processing system and method for selecting securities and constructing an investment portfolio is based on a set of artificial neural networks which are designed to model and track the performance of each security in a given capital market and output a parameter which is related to the expected risk adjusted return for the security. Each artificial neural network is trained using a number of fundamental and price and volume history input parameters about the security and the underlying index. The system combines the expected return/appreciation potential data for each security via an optimization process to construct an investment portfolio which satisfies predetermined aggregate statistics. The data processing system receives input from the capital market and periodically evaluates the performance of the investment portfolio, rebalancing it whenever necessary to correct performance degradations.

[0021] The '899 patent describes combining data gathering and processing methodology with computer apparatus to produce a system whereby a list of stocks and a cash position is generated and purchased for investment and operating accounts. Specifically, the system integrates three areas of data: investment performance for investment managers (the investment manager database); federal Securities Exchange Commission ("SEC") reports filed quarterly by investment managers (the government report database); and financial characteristics for a large number of stocks (the stock database). Various screens and criteria are applied to the three data areas. The investment managers in the investment manager database are screened to find investment managers with top performances who meet a series of other criteria. The government reports are screened based upon the largest stock holdings for the investment managers chosen in the first step. The stock database financial characteristics are applied against the stocks from the government reports. [0022] None of the above patents describe an effective manner for factoring in corporate governance and shareholder value criteria for portfolio management.

[0023] Consequently, there is a need in the art for a method of enhancing equity portfolios utilizing corporate governance driven shareholder value inputs.

[0024] There is a further need in the art for a method of enhancing equity portfolios utilizing corporate governance driven shareholder value inputs designed to suit the investment objectives of long-term oriented institutional investors, e.g. pension funds.

[0025] There is a further need in the art for a method of enhancing equity portfolios utilizing corporate governance driven shareholder value inputs to enhance benchmark indexes, as well as Exchange Traded Funds (ETF), which track benchmark indexes, and which are labelled, among others: Diamonds, iShares, LDRs, QQQ and SPDRs.

[0026] There is a further need in the art for a method of enhancing equity portfolios utilizing corporate governance driven shareholder value inputs to enhance different types of conventional "stock picking active" portfolios.

[0027] There is a further need in the art for metrics for financial "data mining" suppliers, financial corporate rating agencies and/or proxy voting services.

SUMMARY OF THE INVENTION

[0028] The present invention solves significant problems in the art by providing a method of enhancing equity portfolios utilizing corporate governance driven shareholder value inputs.

[0029] In a preferred embodiment of the invention, what is provided is a method for enhancing the returns of an equity portfolio, comprising quantifying investor opinions and opinions of other experts in the field of finance on corporate governance; scoring stocks using main value driver criteria; and enhancing the equity portfolio based upon the stock scoring results. [0030] In an alternate embodiment, what is provided is a method for enhancing the returns of an equity portfolio, comprising quantifying the potential impact on equity markets of the views expressed by leading institutional investors on major corporate governance and shareholder value issues; monitoring continuously the consensual opinion of leading institutional investors, and other opinion leading experts, through periodic surveys; scoring stocks using main value driver criteria; and enhancing the equity portfolio based upon the stock scoring results.

[0031] In a further alternate embodiment, the invention provided is a method for enhancing the returns of an equity portfolio relative to a benchmark stock index, comprising quantifying the potential impact on equity markets of the views expressed by leading institutional investors on major corporate governance and shareholder value issues; monitoring continuously the consensual opinion of leading institutional investors, and other opinion leading experts, through periodic surveys; scoring stocks using main value driver criteria; and enhancing the equity portfolio based upon the stock scoring results.

[0032] In a further alternate embodiment, the invention provided is a method for enhancing the returns of an equity portfolio, comprising scoring stocks using main value driver criteria including corporate governance criteria; and enhancing the equity portfolio based upon the stock scoring results.

[0033] In a still further embodiment of the invention, the invention provided is a computer-implemented system for ranking at least one stock, comprising at least one stock chosen to be included in an enhanced equity portfolio; criteria analyzed for each stock, due to the criteria relevance to stock performance; a score objectively assigned to each criterion; a predetermined weight assigned to each criterion; a subtotal number for each criterion, whereby the subtotal number is the product of the objectively assigned score and the predetermined weight; a total number, whereby the total number is the sum of the subtotal numbers for the criteria; a database for storage of the criteria, the score, the predetermined weight, the subtotal number, and the stock total number; a computer, whereby the computer is used for retrieving information from the database and scoring the stocks.

[0034] In a still further embodiment of the invention, the invention provided is a computer-implemented method for ranking at least one stock, comprising selecting at least one stock, whereby the stock will be included in an enhanced equity portfolio; choosing criteria to be attributed to each stock, due to the relevance of the criteria to stock performance; analyzing criteria for each stock; assigning an objective score to each criterion; assigning a predetermined weight to each criterion; calculating a subtotal score for the stock, whereby the subtotal score is the product of the objective score and the predetermined weight; calculating a total score of the stock, whereby the total score is the sum of the subtotal scores; ranking the stock relative to other stocks in the enhanced equity portfolio, based upon the total score.

[0035] Accordingly, it is an object of the present invention to provide a method of enhancing equity portfolios utilizing corporate governance driven shareholder value inputs.

[0036] It is a further objective to provide a method of enhancing equity portfolios utilizing corporate governance driven shareholder value inputs designed to suit the investment objectives of long-term oriented institutional investors, e.g. pension funds.

[0037] It is a further objective to provide a method of enhancing equity portfolios utilizing corporate governance driven shareholder value inputs to enhance benchmark indexes, as well as Exchange Traded Funds (ETF), which track benchmark indexes, and which are labelled, among others: Diamonds, iShares, LDRs, QQQ and SPDRs.

[0038] It is a further objective to provide a method of enhancing equity portfolios utilizing corporate governance driven shareholder value inputs to enhance different types of conventional "stock picking active" portfolios. [0039] It is a further objective to provide metrics for financial "data mining" suppliers, financial corporate rating agencies and/or proxy voting services.

BRIEF DESCRIPTION OF THE DRAWINGS

[0040] FIG. 1 is a flow chart of a preferred embodiment of the portfolio enhancement method according to the invention.

[0041] FIG. 2 is a flow chart of a preferred embodiment of the present invention detailing the corporate governance and financial performance criteria of the stock scoring process.

[0042] FIG. 3 is a performance chart empirically illustrating the overperformance of the present invention versus the FTSE Europe (ex Switzerland) benchmark in the ABF Europe Valeur Actionnariale experimental fund.

DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENT

[0043] Referring initially to FIG. 1 of the drawings, in which like numerals indicate like elements throughout the several views, in a preferred embodiment the portfolio enhancement is achieved by an architecture relying on inputs screened from the following three mam sources in the Database Screening Process 2: Desk Research 4; Field Research 6 and Experimental Feedback 8. The data gleaned from the Database Screening Process 2 is then input into the Stock Scoring Process 10 with the ultimate goal of enhancing 16 an equity portfolio. Data gathered on individual stocks is stored on an information database for later retrieval and use with a stock scoring computer.

2.0 Data Base Screening Process 2.1 Desk Research

[0044] The prime objective of Desk Research 4 is to evaluate the impact on equity markets of the views expressed on major corporate governance and shareholder value issues, by pension fund officials, and other leading institutional investment opinion leaders. Its secondary objective aims at collecting information on the views of other leading corporate governance and shareholder value players, whose behavior may also impact equity markets, e.g.: corporate and/or regulatory officials, securities analysts, financial advisors, lawyers, journalists, academics, and the like.

[0045] For this purpose, the Desk Research 4 is focused on a continuous worldwide screening of the most relevant articles, books, codes of best practices, reports, statements, speeches, TV shows, Web sites and other public releases on major corporate governance and shareholder value issues.

[0046] The Desk Research 4 can be facilitated by relying on the information released by Bloomberg, NewsEdge, Reuters, WSJ.com, or other large-scale diversified business data suppliers, as well as by more specific corporate governance data suppliers, e.g.: Davis Global Advisors, Deminor, Governance Publishing and Information Services, investor Responsibility Research Center ("IRRC"), Institutional Shareholder Services ("ISS"), Lens's Corporate Library, Pensions Investment Consultants ("PIRC"), and Proxinvest, among others.

[0047] Information overload could be reduced with artificial intelligence software, e.g. the algorithms of Anatomy Corp. in Cambridge, England.

2.2 Field Research

[0048] The Field Research 6 aims at periodically monitoring the views expressed by the aforesaid opinion leaders on major corporate governance and shareholder value issues. For this purpose, a series of surveys carried out by mail, e-mail, telephone, or direct contacts are required among a representative sample of these opinion leaders.

[0049] For the investment professionals who happen to be both a source of leading opinions and closely connected with the aforesaid opinion leaders, a series of semi-structured or even unstructured interviews may suffice. These interviews could be conducted either during ad hoc meetings, or in the framework of the numerous conferences attended by these opinion leaders. One of the first such surveys was carried out during the "Open Forum on Shareholder Values" session of the 1997 ICGN Conference in Paris, which was chaired by the inventor.

[0050] For the investment professionals who are neither a source of leading opinions nor closely connected with the aforesaid opinion leaders, the following modus operandi is prescribed:

2.2.1 Selection of the Samples of the Surveys

[00511 Samples of 300, or more, opinion leaders can be drawn up for interviews among influential pension fund representatives, mutual fund managers, and insurers. The samples can be structured according to the sizes of the equity portfolios held by each group of opinion leaders.

2.2.2 Selection and Rating of the Value Driver Criteria

[0052] Each value driver criterion and sub-criterion can be rated by the respondents on a scale of 0 to 10, for example:

Communications & Reporting

Pro-Shareholder Value Mission Statements 2.5

Adoption of an adequate corporate governance code 2.5 Adoption of an adequate accounting standard 2.5

Other Communications and Reporting Criteria 2.5

Total: 10.0

2.2.3 Weighting of the Value Driver Criteria

[0053] Each one of the ten main value driver criteria can also be rated by the respondents on a scale of 0 to 10 by comparison to each other, so as to weight their relative importance, e.g.:

Corporate Governance Criteria

Communications and Reporting 1.0 Voting Rights 1.0

Corporate Boards 0.4

Strategic Focus 0.4

Remuneration Policies 0.3

Regulatory Framework 0.2

Corporate Citizenship 0.2

Financial Criteria

Operating Performance 2.5

Shareholder Returns 2.0

Comparative Peer Stock Valuations 2.0

Total: 10.0

2.2.4 Periodicity of the Surreys

[0054] The surveys can be carried out once a year, or every six months, if considered required by the evolution of the consensus.

2.3 Experimental Feedback

[0055] Experimental Feedback 8 is the third component of the Database Screening Process 2. Analysis of the performance attribution of an experimental fund (should one be available) can provide a comprehensive heuristic platform for assessing the impact of the corporate governance and shareholder value related driver criteria.

[0056] The example, which is shown in FlG. 3, is intended as an illustration of the results that can be achieved by relying on one of the alternate embodiments of the invention. No limitation of the invention is implied. FIG. 3 is a graph that demonstrates the overperformance of the portfolio of the ABF Europe Valeur Actionnaiiale Fund enhanced by the present invention in relation to a benchmark index, in this case the FTSE Europe (ex Switzerland). The comparison begins in January 1998 and extends to January 2001, a time period of 3 years. In the financial services field, three years is the standard time period required for proving the efficiency of fund enhancement theories and methods. As can be seen on the chart, however, the corporate governance enhanced fund has thus far outperformed the benchmark by over 8%.

[0057] Referring back to FIG. 1, the aforesaid Data Base Screening 2 merely aims at capturing a comprehensive amount of relevant information, which can be sieved through the sensitive lens of the value driver criteria of the Stock Scoring Process 10. That is, the data input from the Data Base Screening Process 2 feeds the value driver criteria and subcriteria driving the Stock Scoring Process 10.

3.0 Stock Scoring Process

[0060] Turning to FlG. 2, represented is the detailed itemization of the Corporate Governance Criteria and the Financial Performance Criteria used in the Stock Scoring Process 10.

3.1 Corporate Governance Criteria

[0061] Corporations are rated against their peer group benchmarks, within the geographic framework which is currently the most influenced by the behavior of leading institutional investors, e.g. the North Atlantic area which benefits from both the impact of these institutional investors and a growing convergence of corporate governance practices. The use of the present portfolio enhancement method could later on be extended to other geographical areas benefiting from similar conditions, as a prelude to a global coverage.

3.1.1 Communications and Reporting

-Pro-Shareholder Value Mission Statements

[0062] Pro-Shareholder Value Mission Statements expressed in annual reports, at annual general meetings of shareholders, or through the media contributes to raise corporate ratings. They are more particularly relevant whenever a new Chairman, a new Chief Executive Officer, or a new management team takes over at a company saddled with a previously poor corporate governance track record. -Adoption of a Corporate Governance Code

[0063] Corporations are rated according to whether they outline, in their annual reports or in other corporate documents, the corporate governance code to which they adhere, e.g.: their own corporate code, their national code (like the Cadbury Code in the UK, or the Vienot Code in France), or an international code like the ICGN or the OECD Codes.

-Adoption of Global Accounting Standards [0064] Corporations are expected to disclose information allowing adequate comparison with their global peer group benchmark. They should therefore adopt a widely used international accounting standard, e.g. U.S. Generally Accepted Accounting Principles ("GAAP") or International Accounting Standards ("IAS"). The U.S. GAAP is more highly rated than the IAS, because it is used by the most important worldwide group of listed corporations, which happens to be located in the U.S.A. Corporations relying on the IAS, but which have developed bridges with the U.S. GAAP, are also highly rated, just below the U.S. GAAP. Companies sticking to then- national accounting systems are under-rated.

-Other Communications and Reporting Criteria [0065] The highest ratings are bestowed on stocks of corporations which disclose, among others: the remuneration of their corporate officers; the details of their Employee Stock Option Plans ('ΕSOP"); the terms of their mergers, acquisitions and divestiture transactions; the structure of their corporate boards; material risk factors which could affect their business, etc.

3.1.2 Voting Rights

-Voting Right Caps

[0066] Stocks penalized by voting right caps (e.g. the 2 % or more, caps affecting certain continental European corporations) are under-rated.

-Voting Right Discriminations

[0067] Voting right discriminatory privileges are under-rated, e.g. higher voting rights such as the double-voting privilege favoring certain specific shareholders, or the "golden share" privilege of national state organizations.

-Other Voting Right Criteria

[0068] All deviations from the "one share-one vote" principle contribute to degrade stock ratings, e.g.: cross-shareholding arrangements between corporations; discriminatory shareholding pools; supermajority provisions requiring a vote greater than 50% for a provision to pass; new stock issues without pre-emptive right provisions to shareholders; dead-hand poison pills; confidential voting procedures, etc.

3.13 Corporate Boards

-Independent Directors

[0069] The consensus, among leading institutional investors, is to favor a majority of independent directors. For example: the director should not have been employed within the last 5 years in an executive capacity by the corporation; is neither a paid adviser to the corporation, nor a significant customer or supplier of the corporation; is not a relative of an executive of the corporation or is not part of an interlocking directorate with another corporation. Corporations are therefore rated according to the proportion of independent directors on their Boards.

-Corporate Board Structures

[0070] Corporations are rated according to whether their Boards have set up the minimum three Committees (preferably exclusively composed of "independent directors"), i.e.:

Audit Committee Compensation Committee Nomination Committee

Additional Committees (e.g. the Strategic Committee, which could include executive directors) contribute to upgrade the rating of the stock.

-Splitting the Chairman and Chief Executive Officer Functions

[0071] Stocks of corporations splitting the Chairman and the Chief Executive Officer functions are over-rated, in accordance with the preference expressed by a majority of leading institutional investors.

3.1.4 Strategic Focus -Core Business Focus

[0072] Leading institutional investors tend to favor "pure play" corporations, focused on their core business, for the following reasons: the growing complexity of businesses requires a higher level of focused management expertise; focused companies tend to be favored by stronger market positioning; it also allows a better monitoring of their corporate performance, through peer group benchmark comparisons. Corporations are therefore rated according to the concentration of their activities on a single core business.

-Non-Core Business Spin-Offs

[0073] High ratings are bestowed on corporations announcing and/or implementing non-core business spin-offs. Conversely, low ratings penalize corporations announcing and/or implementing diversification programs beyond their field of expertise, particularly when such non-core diversifications were not submitted to shareholder votes.

3.1.5 Remuneration Policies

[0074] Remuneration policies should be congruent with shareholder interests and be subject to performance measurements, based on objective metrics, e.g. total shareholder returns matched against a peer group benchmark, or returns on net assets in excess of capital costs (e.g. Stern Stewart Co. ' s EVA \

-Corporate Directors and Executives

[0075] High ratings are awarded according to the level of stock incentives granted to both board directors and executives, provided that these incentives are not affected by re-pricing loopholes and do not contribute to either short term speculative market bubbles, or to stock value dilutions.

-Employees

[0076] High ratings reward the ratio of the corporate capital owned by employees, through ESOPs, or other stock incentive programs.

3.1.6 Regulatory Framework -Stock Listings

[0077] High ratings reward corporations which benefit from a listing on a U.S. Stock Exchange, as the latter provides access to the largest relatively "shareholder friendly" equity capital market. Corporations which benefit from a full listing are more highly rated than corporations which are merely listed with the categories of American Depository Receipt ("ADR") which do not require the adoption of U.S. GAAP type of accounting and reporting standards (to be checked with Adoption of Global Accounting Standards in 3.1.1 Communications and Reporting to avoid double-counting). Corporations benefiting from a major index up-graded listing are also favored by a higher rating.

-Incorporations

[0078] Low ratings penalize companies incorporated in countries, or certain local states, that do not benefit from a sufficiently attractive regulatory framework for shareholders (i.e. countries, or certain local states, with lax financial disclosure standards or lacking adequate corporate governance norms).

[0079] Low ratings also penalize companies which shift their place of incorporation to countries, or certain local states, with regulatory provisions which may not be as "shareholder friendly" as those of the former place of incorporation.

3.1.7 Corporate Citizenship -Disclosure

[0080] Corporations are expected to inform their shareholders on how they deal with the impact of both social and environmental issues on their business. Failure to do so generates poor ratings.

-Social Issues

[0081] High ratings reward corporations reputed for their harmonious relationships with their employees, their suppliers, their customers, and their local communities. They also reward corporations that publish "Statements of Business Ethics", disclosing to which, if any, relevant codes of best practice they adhere. For example, the OECD "Anti-Bribery Code" drafted in cooperation with the World Bank, the "Social Accountability Certification SA 8000" based on the conventions of the International Labor Organization, the "Universal Declaration of Human Rights" or the "Convention on the Rights of the Child" of the United Nations.

-Environmental Issues

[0082] High ratings reward corporations publishing 'Environmental Reports" and disclosing to which, if any, relevant codes of best practice they adhere, e.g.: the 'Environmental Guidelines for World Industry" of the International Chamber of Commerce, the "Environmental Accounting Standards" of the European Federation of Financial Analysts' Societies ("EFFAS"), the 'Environmental Certification" ISO 14000, the "Principles" of the Coalition for Environmentally Responsible Economic ("CERES"), or the "Eco-Efficiency Guidelines" of the World Business Council for Sustainable Development.

3.2 Financial Criteria

[0083] Financial corporate ratings are matched, like the preceding corporate governance criteria, against their peer group benchmark. The latter should involve the same geographical framework relied upon for the corporate governance criteria, e.g. the North Atlantic area which benefits from both the impact of leading institutional investors and a growing convergence of corporate governance practices. The use of the present method for enhancing equity portfolios could be extended later on to other geographical areas benefiting from similar conditions, as a prelude to a global coverage.

3.2.1 Operating Performance

-Earnings Growth

[0084] Corporations can be rated according to their earnings per share ('ΕPS") growth projections, both individually and compared to their peer group benchmarks. The analysis could be refined, by benchmarking either Operating Cash How data or Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA"), or other earning projections, whenever required and feasible. The projections can be based on corporate forward-looking statements, blended with consensus forecasts of securities analysts. Their "warning flags", indicating likely earnings surprises, can also be relied upon for rating purposes. The earning projections could be rated (both in absolute terms and compared to their respective peer group benchmarks) as follows:

Ratings

Earnings growth > 30 % per annum Maximum

Earnings growth from 10 to 30 % per annum Earnings growth from 0 to 9 % per annum Loss projections Mini imum

-Returns on Net Assets

[0085] Corporations can be rated according to their returns on net assets in excess of their capital costs (e.g. Stern Stewart Co.'s Economic Value Added EVA ). It is a historical measurement which, combined with Stern Stewart Co.'s "Future Growth Returns" ™ ratios of "Enterprise Values" estimates, can approximate the capacity of a corporation to generate adequate returns compared to its peer group in the future. A higher rating also rewards a corporation announcing its τ> adoption of an EVA program.

-Impact of Corporate Mergers, Acquisitions, Divestitures and Restructurings

[0086] The potential impact on future earnings of corporate mergers, acquisitions, divestitures and restructurings can also be rated according to consensus estimates of seasoned securities analysts.

-Impact of Conventional Productivity Enhancement

Programs

[0087] The adoption of large-scale customer-oriented minimum level defect programs, similar to the Six Sigma quality control process of General Electric for instance, deserves higher ratings.

-Impact of E-Business and other Cutting-Edge

Technologies

[0088] Higher ratings should not only reward TMT (telecoms, media and technology) companies, which stand to benefit financially from the impact of new technologies, encompassing among others: Dot Corns, content producers, e-appliance manufacturers, platform providers, telecoms, etc. Actually, the new technologies are likely to impact both the so-called old and new economy companies. Indeed, the valuation of old economy companies could reflect the impact of the lower procurement and distribution costs generated by e- commerce (e.g. B2B and/or B2C transactions). As far as the impact on the new economy companies is concerned, it could be assimilated to the way pharmaceutical companies are evaluated, i.e.: on the profitability of their currently marketed drugs, combined with the potential of both their products under development and their research know-how to develop new compounds in the future. As in the pharmaceutical industry, valuation problems may occur when new technology companies do not generate profits. In such a case, profitability forecasts, even by seasoned securities analysts, should be handled carefully in this speculative area.

-Multinationality

[0089] Corporations are rewarded a higher rating for being geographically diversified, thus avoiding the risks inherent to their limitation to a single country.

-Impact of New CEO

[0090] The recruitment of a more efficient and shareholder friendly CEO, endowed with a successful track record deserves higher ratings. The track record of the new CEO could enhance his mission statements, rated in 3.1.1 Communications and Reporting.

3.2.2 Shareholder Returns

-Total Shareholder Returns

[0091] A company characterized by a more generous dividend payout policy (should the latter be warranted) than its peer group deserves a higher rating.

[0092] Relative capital appreciation, compared to its peer group (e.g. Stern Stewart & Co.'s Market Value Added MVA), is a historical measurement which cannot easily be projected in the future.

[0093] Most "Buy", "Hold", or "Sell" recommendations of securities analysts cannot be considered to be sufficiently reliable to forecast future capital gains, or losses, so as to significantly orient the rating of a company. Stern Stewart's 'ϊuture Growth Value" ™ ratios of "Enterprise Value" could be monitored with the following rating model:

Future Growth Value (FGV) / Enterprise Value (EV)

Ratings

FGV > 70 % of EV Maximum

FGV from 30 % to 69 % of EV

FGV < 0 % to 30 % of EV

Negative FGV Minimum

-Stock Buybacks

[0094] A company characterized by more generous stock buyback programs (should they be warranted) than its peer group benchmark deserves a higher rating. Progressively higher ratings reward the announcement of future stock buyback programs, followed by their implementation with a cancellation of the repurchased stocks.

3.2.3 Comparative Peer Stock Valuations

-Price / Earning Ratios

[0095] Corporations are the more highly rated as their Price/Earning ratios (P/E), both current and projected, are low, compared to their peer group benchmark. The P/E projections are based on consensus forecasts made by securities analysts. P/E projections could, for example, be rated as follows:

Ratings

Undervaluation > 30 % Maximum

Undervaluation from 10 to 30 % Undervaluation from 0 to 9 % Overvaluation Minimum

-Price / Earning to Growth Ratios

[0096] Comparing P/E to Growth ratios relative to their benchmark can further refine the ratings. A lower P/E to Growth ratio, relative to the benchmark, generates a higher rating.

-EV/ Cash Flow or EV / EBITDA Ratios

[0097] P/E ratios could be replaced by more reliable ratios of Enterprise Value (EV amounts to market value + net debt) to either Operating Cash Flow or EBITDA, should investment professionals generally favor the adoption of one of the latter ratios in the future.

4.0 Stock Scoring Metrics

[0098] The selection, rating, weighting and scoring 10 of the aforesaid criteria and sub-criteria 12 and 14 are not constant. They fluctuate according to the inputs retrieved from the Data Base Screening Process 2.

[0099] As previously stated, the stocks can be rated by the aforesaid criteria and sub-criteria on a scale of 0 to 10 for each criterion, or by any equivalent scale. These ratings can then be weighted according to the impact on equity markets of each value driver criterion, detected during the Data Base Screening Process 2.

[0100] The following hypothetical example of XYZ Co. illustrates the rating, weighting and scoring metrics of the present portfolio enhancement method.

XYZ Co.

Value Driver Criteria Score Weight Subtotal

(0-10)

Corporate Governance Criteria

Communications and Reporting 8.0 1.0 8.0

Voting Rights 8.5 1.0 8.5

Corporate Boards 7.7 0.4 3.1

Strategic Focus 8.0 0.4 3.2

Remuneration Policies 8.0 0.3 2.4

Regulatory Framework 7.5 0.2 1.5

Corporate Citizenship 7.5 0.2 1.5

Financial Criteria

Operating Performance 9.5 2.5 23.7

Shareholder Returns 8.7 2.0 17.4

Comparative Peer Stock Valuations 9.3 2.0 18.6

Total : 87.9

Stocks can then be ranked according to their Total, e.g.

XYZ Co. 87.9 XXX Co. 83.0 YYY Co. 81.9 ZZZ Co. 80.7 Etc.

[0101] Such a ranking facilitates the Portfolio Stock Enhancement Process 16, as it allows the stocks to be regrouped into three categories, for example:

Highly rated stocks, on a scale of 66 to 100. Neutral stocks, on a scale of 33 to 65. Poorly rated stocks, on a scale inferior to 33.

5.0 Portfolio Stock Enhancement Quant Process

[0102] The portfolio stock enhancement, or tilting, process 16 can vary, according to the types of portfolios considered. The corporate governance scores 12 alone could also be relied upon for enhancing conventional "stock picking active" portfolios. The latter could be managed with financial criteria differing from the aforesaid financial criteria 14.

[0103] Although each criterion and sub-criterion could be considered as an independent modular block, the lessons learned from the test experiment indicate that the sequential operating procedure of the present portfolio enhancement method provides a unique comprehensive, integrated and synergetic grid, which performs well embedded in quant index tracker equity funds. The latter, structured according to the "Arbitrage Pricing Theory" (APT) defines the "Tracking Error" (also labeled "Active Risk") of the portfolio. The "Tracking Error" measures the standard deviation of the difference between the rates of returns of the portfolio and the performance of its benchmark (e.g. Dow Jones or Standard & Poor's indexes). It can be expressed by the following mathematical formula, similar to that of the basic reference book by Richard Grinold and Ronald Kahn, "Active Portfolio Management - Quantitative Theory and Applications": Let the portfolio's returns be ^r p

Let the benchmark's return be ^r _β

Let the difference between the two preceding factors (which could be labeled "active return") be ^r p^

Then 'Tracking Error" = Std { r _p j = Std { r _p _ r _β }

[0104] The portfolio can be structured so as to match the risk profile of its selected benchmark with "Tracking Errors" averaging, for instance, 2 to 3 % per annum.

[0105] The portfolio should in principle be periodically rebalanced, so as to up-date the inputs emerging from the Data Base Screening Process 2 and to stamp the impacts of the latter on the Stock Scoring Process 10.

[0106] The portfolio should also be re-balanced to match the changes occurring in the underlying indexes.

[0107] The following hypothetical example illustrates the overweighing of stocks of a quant index enhanced equity fund with a "Tracking Error" of about 2 %. A similar method is applied for underweighted stocks.

Stocks Index Weighting Overweighting Portfolio Weighting

XYZ Co. 0.76 0.53 1.29

XXX Co. 0.24 0.76 1.00

YYY Co. 0.27 0.67 0.94

ZZZ Co. 0.32 0.55 0.87

[0108] There is a wide variety of applications of the quant index tracking process. Their detailed descriptions extend beyond the scope of this patent application.

[0109] Additionally, it will be understood that the preferred embodiment of the present invention has been disclosed by way of example and that other modifications and alterations may occur to those skilled in the art without departing from the scope and spirit of the appended claims.

6.0 Computer Implementation of an Embodiment

Referring to Fig. 4 a computer system suitable for implementing the methods discussed above is shown in more detail. The individual components of the system are shown schematically and it will be apparent to the skilled reader that any appropriate processing/input/output/memory, storage or database components can be used as appropriate. The individual components can be provided in a single entity or can be distributed across a network as appropriate.

A computer 400 includes an input/output module 402, a processor module 404 and a data storage or database module 406, all arranged to communicate with one another hi any appropriate manner as will be well known to the skilled reader. The input/output module 402 receives an input 408 from and provides an output 410 to a processor 412 such as a personal computer (PC) or any other appropriate resource either by direct link or via a network 414 such as the internet.

The input/output module 402 receives as an input a stock identifier representing a stock chosen to be included in an enhanced equity portfolio. Also received as an input is a set of scores objectively assigned to respective criteria attributed to the stock. The criteria are selected according to their relevance to the stock performance and the scores assigned to the criteria can be determined using any of the techniques described in more detail above.

The input/output module 402 can further receive a predetermined weight assigned to each criteria for processing and storage for later use in database 406. Alternatively the database 406 can store a table of data including a stock identifier for each stock, the relevant criteria for each stock and the score and predetermined weight attributed to each criterion. The input/output module 402 and/or database 406 send and inputs the score and predetermined weight for each criterion to a processor 404. The processor 404 computes a subtotal number for each criterion as the product of each score and the corresponding predetermined weight. The processor further computes a total number comprising the sum of the subtotal numbers for the criteria. The processor transmits the subtotal number and total number to the database where those numbers are stored against the stock together with the criteria, scores and predetermined weights, which can be stored in any appropriate tabular or other form. As a result information from the database for scoring stocks determined at a user module 412 can be retrieved from the computer 400 for example by entering a command to retrieve information concerning pre-processed stocks which is received at the input/output module 402 and processed by the processor 404 to retrieve the relevant data from the database 406, or by inputting new stock and criteria information which is processed as described above and output to the user module.

Claims

The invention claimed is:

1. A method for enhancing the returns of an equity portfolio, comprising: quantifying investor opinions and opinions of other experts in the field of finance on corporate governance; scoring stocks using main value driver criteria; and enhancing said equity portfolio based upon said stock scoring results.

2. The method of claim 1, wherein said main value driver criteria include communications and reporting; voting rights; corporate boards; strategic focus; remuneration policies; regulatory framework; corporate citizenship; operating performance; shareholder returns; and comparative peer stock valuations.

3. The method of claim 1, wherein enhancing said equity portfolio is achieved by over-weighting high scoring stocks and under-weighting low scoring stocks.

4. A method for enhancing the returns of an equity portfolio, comprising: quantifying the potential impact on equity markets of the views expressed by leading institutional investors on major corporate governance and shareholder value issues; monitoring continuously the consensual opinion of leading institutional investors, and other opinion leading experts, through periodic surveys; scoring stocks using main value driver criteria; and enhancing said equity portfolio based upon said stock scoring results.

5. The method of claim 4, wherein at least one said quantitative corporate governance driven shareholder value fund is either an upgraded version of the ABF Europe Valeur Actionnariale fund, or at least one fund inspired by the design of the latter fund and developed in another geographical area.

6. The method of claim 4, wherein said main value driver criteria include communications and reporting; voting rights; corporate boards; strategic focus; remuneration policies; regulatory framework; corporate citizenship; operating performance; shareholder returns; and comparative peer stock valuations.

7. The method of claim 4, wherein enhancing said equity portfolio is achieved by over-weighting high scoring stocks and under-weighting low scoring stocks.

8. The method of claim 4, wherein the method for enhancing the returns of an equity portfolio further comprises the assessment of the performance attribution of at least one quantitative corporate governance driven shareholder fund, whenever available, feasible and required,

9. A method for enhancing the returns of an equity portfolio relative to a benchmark stock index, comprising: quantifying the potential impact on equity markets of the views expressed by leading institutional investors on major corporate governance and shareholder value issues; monitoring continuously the consensual opinion of leading institutional investors, and other opinion leading experts, through periodic surveys; scoring stocks using main value driver criteria; and enhancing said equity portfolio based upon said stock scoring results.

10. The method of claim 9, wherein said benchmark stock index is selected from the group consisting of, globally, Dow Jones World, Dow Jones World (ex-U.S.), Dow Jones Global Titans, Dow Jones Global Media, Dow Jones Global Pharmaceuticals, Dow Jones Global Telecoms, Dow Jones Islamic, Dow Jones Sustainability World, Financial Times Stock Exchange (FTSE) World, FTSE Global 100, FTSE Multinationals, Morgan Stanley Capital International (MSCI) World, Salomon Smith Barney EMI World (ex - U.S.), Salomon Smith Barney PMI World (ex-US), S&P / IFC Global Composite, regionally, Dow Jones Americas, Dow Jones Latin America, Bloomberg European 500, Central European Stock Index (CESI), Dow Jones Euro Stoxx P, Dow Jones Euro Stoxx 50 P, Dow Jones Europe Stoxx (586), Dow Jones Europe Stoxx P, Dow Jones Stoxx 50 P, Dow Jones Europe Sectorial Indexes, Dow Jones Europe/Africa, Dow Jones Europe/Africa (ex-UK and South Africa), EASDAQ, Euro NM All Share Price, Euronext 100, Euronext 150, FTSE Euro-Stars, FTSE Eurotop 100, FTSE Eurotop 300, FTSE Europe 700, FTSE Europe 700 (ex Switzerland), FTSE e-TX Innovation, MSCI Euro, MSCI Pan Euro, S&P Europe 350, Dow Jones Asia/Pacific, Dow Jones Asia/Pacific (ex Japan), HSBC Dragon 300 Asia/Pacific, IFC Investable Emerging Markets, ING Barings Emerging Markets, MSCI Europe Australasia Far East (EAFE), MSCI Asia (ex Japan), MSCI Emerging Markets, in Argentina, Burcap, General, Merval, in Australia, ASX All Ordinaries, ASX All Industrials 500, ASX All Resources 500, ASX Smallcap Ords., MSCI Australia, Share Price Index, S&P/ASX 20 Leaders, S&P/ASX 100, S&P/ASX 200, S&P/ASX 300, in Austria, Austrian Traded ATX, Austrian ATX 50, MSCI Austria, in Belgium, Belgian Stock Market Ret. IX, Belgian VLAM - 21, BEL 20, Euro NM Belgium, MSCI Belgium, in Brazil, Bovespa, Electrical Energy, IBX, ISOMA, MSCI Brazil, in Canada, CVX Composite, TSE 35, TSE / S&P 60, TSE 100, TSE 200, TSE 300, MSCI Canada, in Chile, IGPA General, in China, Dow Jones China 88, Dow Jones Shanjghai, Dow Jones Shenzhen, SE Shanghai A, SE Shanghai B, SE Shenzhen A, SE Shenzhen B, in Colombia, BOG - BOLSA - IBB, Medellin SE General, in Costa Rica, BCT - CR, in the Czech Republic, Czech HN-WOOD, Prague Stock Exchange PX 50, in Denmark, Denmark Stock Market, KFX Copenhagen Share Index, in Ecuador, Guayaquil Bolsa, in Egypt, EFG, Hermes, in Estonia, Tallinn General, in Finland, HEX General, in France, CAC 40 Index, Euro NM Nouveau Marche, ITCAC Indexes, SBF MIDCAC, SBF 80, SBF 120, SBF 250, Second Marche, MSCI France, in Germany, CDAX Performance, DAX, DAX Mid-Cap, DAX 100, EuroNeu Markt Blue Chip IX, Euro NM Neu Markt Price IX, FAZ Aktien, XETRA DAX, MSCI Germany, in Greece, ASE Composite, FTSE/ASE 20, in Hong Kong, Hang Seng All Ordinaries, Hang Seng China Aff.Crp., Hang Seng Chine Ent IX, Hang Seng London IX, Hang Seng 100, HSCC Red Chip, MSCI Hong Kong, in Hungary, Budapest Stock Exchange - BUX, Hungarian Traded Index, in Iceland, ICEQ Indexes, in India, Mumbai BSE Sensex, S&P CNX 500, in Indonesia, Jakarta Composite, in Ireland, Irish Overall - ISEQ, in Israel, Stock Market General, Tel Aviv 25 Index, Tel Aviv 100 Index, in Italy, MIB 30, MIBTEL, Milan Mid-Cap, Euro NM Italy, MSCI Italy, in Jamaica, Main Exchange, in Japan, JASDAQ - BBG Top 50, JASDAQ - BBG Top 100, JASDAQ - BBG Lead Top 100, JASDAQ - BBG Mid 400, MSCI Japan, NIKKEI OTC, NIKiCEI 225, NIKKEI 300, NIKKEI 500, Russell/Nomura Index, TOPIX, TOPIX Core 30, TOPIX Large 70, TOPIX Small, TOPIX Mid 400, TSE2 TOPIX 2^nd Sector, in Luxembourg, Luxembourg LuxX, in Malaysia, KLSE Composite, KLSE 2^nd Board, KLSE EMAS, MSCI Malaysia, in Mexico, IPC Bolsa, INMEX, MSCI Mexico, in the Netherlands, Amsterdam Exchanges - AEX, Amsterdam Mid-Cap, CBS Indexes, Euro NM Netherlands, MSCI Netherlands, in New Zealand, NZSE Ail Ordinaries, NZSE Top 40, in Norway, OBX Industrials, OBX Total, in Pakistan, KSE Index, in Panama, General (Panama), in Peru, Lima General, Lima Selective, in the Philippines, Manila Composite, in Poland, WSE WIG Indexes, in Portugal, Lisbon BVL Indexes, Portugal PSI-20, in Romania, BET, in Russia, ASP General Rb, ASP Mkt Index Rb, Russian RTS Index $, Russian Traded Index, in Singapore, DBS 50, SES All, Straights Times STI, MSCI Singapore, in Slovakia, SAX, in Slovenia, SBI, in South Africa, JSE All-Share Index, JSE Top 40 ALSI Index, JSE Top 25 Industr INX, MSCI South Africa, in South Korea, Korea Composite, Korea KOSPI 200, KOSDAQ Composite, KOSDAQ Venture, MSCI South Korea, in Spain, IBEX, Madrid SE, MSCI Spain, in Sweden, Affarvardn. General, OMX (Stockholm) Index, MSCI Sweden, in Switzerland, Swiss Market Index (SMI), SPI Swiss Performance Index, MSCI Switzerland, in Taiwan, General Weighted (Taiwan), TAISDAQ, MSCI Taiwan, in Thailand, Bangkok SET, in Turkey, IMKB Natl. Industrials, and the IMKB National 100, in the United Kingdom, FTSE All-Share Index, FTSE Small Cap Index, FTSE 100 Index, FTSE 250 Index, FTSE 350 Index, FTSE TMT Index, TECHMARK, MSCI United Kingdom, in the United States, AMEX Major Market, AMEX Composite, AMEX Basic Industries, AMEX Consumer Services, AMEX Consumer Staples, AMEX Cyclical/Transportation, AMEX Energy, AMEX Financial, AMEX Industrial, AMEX Utilities, AMEX Technology, AMEX Computer Technology, Dow Jones Composite, Dow Jones Industrials, Dow Jones Transport, Dow Jones Utilities, Dow Jones Basic Materials, Dow Jones Chemicals, Dow Jones Consumer Cyclicals, Dow Jones Consumer Non-Cyclicals, Dow Jones Energy, Dow Jones Financials, Dow Jones Financial Services, Dow Jones Healthcare, Dow Jones Internet, Dow Jones Real Estate, Dow Jones Technology, Dow Jones Telecoms, Dow Jones Total Market, Dow Jones Small Cap Growth, Dow Jones Small Cap Value, Dow Jones Large Cap Growth, Dow Jones Large Cap Value, Fortune 500, Fortune e-50, H&Q Growth, Morgan Stanley Internet (MOX), Morgan Stanley High-Tech 35 (MSH 35), MSCI USA, NASDAQ Banks, NASDAQ Composite, NASDAQ Computer, NASDAQ Industrials, NASDAQ Insurance, NASDAQ . Telecoms, NASDAQ 100, NYSE Composite, NYSE Financial, NYSE Industrials, NYSE Transport, NYSE Utilities, Russell Mid-Cap, Russell Top 200, Russell 1000, Russell 2000, Russell 3000, Russell 1000 Growth, Russell 1000 Value, Russell 2000 Growth, Russell 2000 Value, Russell 3000 Growth, Russell 3000 Value, S&P Financial, S&P Industrials, S&P 100, S&P 400 Mid-Cap, S&P 400 Mid-Cap/Barra Growth, S&P 400 Mid-Cap/Barra Value, S&P 500, S&P 500/Barra Growth, S&P 500/Barra Value, S&P 400 Mid-Cap, S&P 600 Smallcap, S&P 600 Smallcap/Barra Growth, S&P 600 Smallcap/Barra Value, S&P 1500 Supercomposite, Value Line, Wilshire 5000, Wilshire REIT, NCREIF Classical Property, in Venezuela, Market Index - IBC.

11. The method of claim 9, wherein at least one said quantitative corporate governance driven shareholder value fond is either an upgraded version of the ABF Europe Valeur Actionnariale fond, or at least one fund inspired by the design of the latter fund and developed in another geographical area.

12. The method of claim 9, wherein said main value driver criteria include communications and reporting; voting rights; corporate boards; strategic focus; remuneration policies; regulatory framework; corporate citizenship; operating performance; shareholder returns; and comparative peer stock valuations.

13. The method of claim 9, wherein enhancing said equity portfolio is achieved by over-weighting high scoring stocks and under-weighting low scoring stocks.

14. The method of claim 9, wherein the method for enhancing the returns of an equity portfolio further comprises the assessment of the performance attribution of at least one quantitative corporate governance driven shareholder fund, whenever available, feasible and required.

15. A method for enhancing the returns of an equity portfolio, comprising: scoring stocks using main value driver criteria including corporate governance criteria; and enhancing said equity portfolio based upon said stock scoring results.

16. The method of claim 15, wherein said corporate governance criteria include communications and reporting; voting rights; corporate boards; strategic focus; remuneration policies; regulatory framework; and corporate citizenship.

17. The method of claim 15, wherein enhancing said equity portfolio is achieved by over-weighting high scoring stocks and under-weighting low scoring stocks.

18. A computer-implemented system for ranking at least one stock, comprising: at least one stock chosen to be included in an enhanced equity portfolio; criteria analyzed for each said stock, due to said criteria relevance to stock performance; a score objectively assigned to each said criterion; a predetermined weight assigned to each said criterion; a subtotal number for each said criterion, whereby said subtotal number is the product of said objectively assigned score and said predetermined weight; a total number, whereby said total number is the sum of said subtotal numbers for said criteria; a database for storage of said criteria, said score, said predetermined weight, said subtotal number, and said stock total number; a computer, whereby said computer is used for retrieving information from said database and scoring said stocks.

19. A system of claim 18, wherein stocks can be chosen to mimic a larger equity portfolio, said mimicking involving not selecting stocks with a neutral rating.

20. A system of claim 18, wherein said criteria include corporate governance and financial performance criteria.

21. A system of claim 20, wherein said corporate governance and financial performance criteria include communications and reporting; voting rights; corporate boards; strategic focus; remuneration policies; regulatory framework; corporate citizenship; operating performance; shareholder returns; and comparative peer stock valuations.

22. A system of claim 18, wherein criteria include corporate governance criteria,

23. A system of claim 22, wherein said corporate governance criteria include communications and reporting; voting rights; corporate boards; strategic focus; remuneration policies; regulatory framework; and corporate citizenship.

24. A computer-implemented method for ranking at least one stock, comprising: selecting at least one stock, whereby said stock will be included in an enhanced equity portfolio; choosing criteria to be attributed to each stock, due to the relevance of said criteria to stock performance; analyzing criteria for each stock; assigning an objective score to each criterion; assigning a predetermined weight to each criterion; calculating a subtotal score for said stock, whereby said subtotal score is the product of said objective score and said predetermined weight; calculating a total score of said stock, whereby said total score is the sum of said subtotal scores; ranking said stock relative to other stocks in said enhanced equity portfolio, based upon said total score.

25. A method of claim 24, wherein selecting stocks can be performed with the object of mimicking a larger equity portfolio, said mimicking involving not selecting stocks with a neutral rating.

26. A method of claim 24, wherein said criteria include corporate governance and financial performance criteria.

27. A method of claim 26, wherein said corporate governance and financial performance criteria include communications and reporting; voting rights; corporate boards; strategic focus; remuneration policies; regulatory framework; corporate citizenship; operating performance; shareholder returns; and comparative peer stock valuations.

28. A method of claim 24, wherein criteria include corporate governance criteria.

29. A method of claim 28, wherein said corporate governance criteria include communications and reporting; voting rights; corporate boards; strategic focus; remuneration policies; regulatory ^■framework; and corporate citizenship.

30. A method of claim 24, wherein there is an additional step of sending the rankings of said stocks to fund managers, whereby said managers enhance their funds based on said rankings.

31. A computer-implemented system for ranking at least one stock, comprising: an input module, receiving as inputs at least one stock chosen to be included in an enhanced equity portfolio, and a score objectively assigned to respective criteria attributed to said stock, due to said criteria relevance to stock performance; a database storing said criteria and a predetermined weight assigned to each said criterion; a processor module arranged to receive as inputs said score and said predetermined weight and to compute: a subtotal number for each said criterion, whereby said subtotal number is the product of said objectively assigned score and said predetermined weight; a total number, whereby said total number is the sum of said subtotal numbers for said criteria; and wherein said database further stores said score, said subtotal number, and said stock total number; and wherein said processor is arranged for retrieving information from said database to score said stocks.

32. A system of claim 31, wherein stocks can be chosen to mimic a larger equity portfolio, said mimicking involving not selecting stocks with a neutral rating.

33. A system of either claims 31 or 32, wherein said criteria include corporate governance and financial performance criteria.

34. A system of claim 33, wherein said corporate governance and financial performance criteria include communications and reporting; voting rights; corporate boards; strategic focus; remuneration policies; regulatory framework; corporate citizenship; operating performance; shareholder returns; and comparative peer stock valuations.

35. A system of either claims 31 or 32, wherein criteria include corporate governance criteria.

36. A system of claim 35, wherein said corporate governance criteria include communications and reporting; voting rights; corporate boards; strategic focus; remuneration policies; regulatory framework; and corporate citizenship.

37. A computer-implemented method for ranking at least one stock, comprising: selecting at least one stock, whereby said stock is to be included in an enhanced equity portfolio; choosing criteria to be attributed to each stock, due to the relevance of said criteria to stock performance; receiving said stock and an objective score assigned to each criterion at an input module of said computer; storing said criteria and a predetermined weight assigned to each criterion in a database in said computer; receiving said score and said predetermined weight at a processor module in said computer and using said processor module to; compute a subtotal score for said stock, whereby said subtotal score is the product of said score and said predetermined weight, and to; compute a total score of said stock, whereby said total score is the sum of said subtotal scores, and to; rank said stock relative to other stocks in said enhanced equity portfolio, based upon said total score.

38. A method of claim 37, wherein selecting stocks can be performed with the object of mimicking a larger equity portfolio, said mimicking involving not selecting stocks with a neutral rating.

39. A method of any one of claims 37 or 38, wherein said criteria include corporate governance and financial performance criteria.

40. A method of claim 39, wherein said corporate governance and financial performance criteria include communications and reporting; voting rights; corporate boards; strategic focus; remuneration policies; regulatory framework; corporate citizenship; operating performance; shareholder returns; and comparative peer stock valuations.

41. A method of any one of claims 37 or 38, wherein criteria include corporate governance criteria.

42. A method of claim 41, wherein said corporate governance criteria include communications and reporting; voting rights; corporate boards; strategic focus; remuneration policies; regulatory framework; and corporate citizenship.

43. A method of any one of claims 37 to 42, wherein there is an additional step of sending the rankings of said stocks to fund managers, whereby said managers enhance their funds based on said rankings.

44. A computer program configured to implement a method as claimed in any of claims 1 to 17, 24 to 30 and 37 to 43.

45. A computer readable medium storing a computer program as claimed in claim 44.

46. A computer configured to operate according to a computer program as claimed in claim 44.