When you create Custom Rules for a Custom Index model, please note the Custom Rules are stacked. This means that if the instrument meets multiple scaling criteria, the target% is multiplied across all of the scaling values. For example:
Assume the user defines Rule 1, that if the market cap is greater than $1 Trillion, scale by 1.1. The user defines Rule 2 that any instruments in the Tech Industry are scaled by 0.9. in this case, the Target % will be defined as:
- Target % = Model% x 1.1 x 0.9
If the Model% is 4.25%, the Target % = 0.0425 x 1.1 x 0.9 x 100% = 4.2075%