Stock market indices like the S&P 500 or FTSE 100 are widely used benchmarks that track the performance of large, listed companies. These indices typically use market-capitalisation weighting, meaning the largest companies exert the most influence over index performance. For example, in the S&P 500, companies like Apple and Microsoft carry significantly more weight than smaller firms.

While this system offers broad exposure to the market, it also has shortcomings. The most obvious is concentration risk: the index becomes heavily reliant on the performance of a handful of giant companies. If one of these companies suffers a sharp decline, it can drag down the entire index, even if the rest of the market is performing reasonably well.

Another issue is that market-cap indices reward price momentum—companies become more heavily weighted simply because their stock prices have risen. This can lead to an overrepresentation of potentially overvalued stocks and underrepresentation of undervalued ones. Investors who track these indices are essentially buying more of what’s already expensive.

Finally, traditional indices are blunt instruments. They’re designed to reflect entire markets, not specific investment goals. If you’re interested in a particular sector—say global real estate—or a specific investment style, such as high dividend income or lower volatility, these broad benchmarks don’t offer much precision. That’s where customised indices come in.

What Are Customised Indices and Why Use Them?

A customised index is a purpose-built benchmark created to align with a specific investment strategy or theme. Unlike traditional indices that apply a one-size-fits-all model, a customised index can be fine-tuned to reflect a particular sector, set of factors, or investment approach.

These indices are built with clear rules that determine which securities are included, how they’re weighted, and how often the index is updated. This transparency ensures that investors understand exactly what they’re getting.
For example, an index could be designed to track global property companies with strong fundamentals or focus only on real estate stocks that offer high dividend yields. Others might screen for environmental and social governance (ESG) metrics, or isolate companies with low share price volatility. These aren’t features you’ll find in standard market-cap indices.

Custom indices are increasingly being used to power thematic and factor-based ETFs. These ETFs allow investors to access focused strategies—such as clean energy, digital infrastructure, or global REITs—through an index that’s built specifically for that theme. As a result, they offer more precise exposure and greater alignment with the investor’s goals.

How Custom Indices Are Built

Creating a custom index involves a few key steps:

• Defining the Universe – This is the pool of securities the index can draw from. For example, all publicly listed REITs globally.
• Screening for Eligibility – The index applies filters, such as minimum size, liquidity, or specific sector characteristics, to determine which companies qualify.
• Selecting a Weighting Method – Instead of relying solely on market cap, custom indices often use alternatives:
  • Equal Weighting gives each company the same influence, regardless of size, which can reduce concentration risk.
  • Factor Weighting selects stocks based on performance drivers like value, momentum, or low volatility.
  • Modified Weighting allows for adjustments to avoid overexposure to any single stock or region.
• Establishing Rebalancing Rules – Rebalancing can be done quarterly, semi-annually, or annually to ensure the index continues to reflect its intended strategy.

Each of these steps allows index designers to build something that is tightly aligned with investor goals—whether that’s reducing volatility, increasing income, or targeting specific industries.

Reitway Global’s Approach to Custom Indices

At Reitway Global, customised indices play a key role in how we bring specialised listed property strategies to market. Rather than relying on broad, conventional benchmarks, we work with index partners to support investment solutions that are purpose-built for clarity, focus, and long-term relevance.

• Aiming Beyond Traditional Benchmarks

Standard indices often concentrate too heavily on the largest companies and may not always reflect the dynamics of the real estate sector. Through our customised approach, we seek to support strategies that offer more balanced exposure—enabling investors to access listed property investments with better alignment to real-world objectives like diversification, income stability, or total return potential.

• Enabling More Focused Investment Options

Every investor’s goals are different. That’s why we offer access to a range of global REIT strategies built around distinct outcomes—whether that’s seeking reliable income or pursuing broader market exposure across developed and emerging property markets. Customised indices give us the flexibility to support solutions that meet these varied needs in a structured and transparent way.

• Supporting Strategy Development with Historical Analysis

Before a strategy is introduced to the market, extensive modelling and performance analysis are conducted to ensure it behaves as expected over different market environments. While past performance doesn’t guarantee future outcomes, this analytical process helps us offer solutions that are more robust, consistent, and suited to the evolving needs of retail investors.

Why This Matters for Retail Investors

Customised indices are no longer just a tool for institutional investors. Through ETFs, they are now widely accessible to retail investors who want to invest with more precision. If you’re interested in global property, for example, a fund tracking a well-constructed custom index can give you targeted exposure with built-in discipline and transparency.

These indices also provide access to strategies that were previously out of reach for the average investor—such as factor investing, income-focused property portfolios, or ESG-screened real estate. Instead of settling for generic benchmarks, you can now invest in ways that better reflect your financial goals, values, and preferences.

As the investment world continues to shift toward more tailored solutions, customised indices are at the forefront. They provide the foundation for innovative, rules-based strategies that combine the benefits of passive investing (cost, transparency, efficiency) with the flexibility and focus of active thinking.

For anyone building a diversified portfolio, understanding the index behind an ETF is no longer optional—it’s essential. Customised indices give retail investors access to smarter, more aligned investment opportunities, especially in specialised sectors like global real estate.

Reitway Global

At Reitway Global, we focus on delivering global listed property solutions that are clear, targeted, and aligned with investors’ real-world goals. By using carefully constructed indices tailored to our investment philosophy, we’re able to offer access to global REIT strategies through vehicles that prioritise consistency, relevance, and investor outcomes. Whether you're looking to enhance income, diversify your holdings, or build long-term exposure to international real estate, our ETF-based solutions are designed to offer a more intentional way to invest in listed property.

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