Methodology

The Meridian Quality Index is a rules-based, systematic equity index. It screens U.S.-listed companies for durable business quality and holds a concentrated set of the strongest names, rebalanced on a regular schedule.

Index Objective

The Index seeks durable U.S. businesses that compound value over time — companies that earn strong returns on the capital they employ, grow on their own merits, and consistently return cash to shareholders. Each candidate is evaluated against a consistent set of factors, and the highest-quality names are admitted.

What the Index Looks For

Companies are assessed across several dimensions of business quality and resilience. Among the factors considered:

• Returns on capital — how efficiently a business turns invested capital into profit, favoring companies that sustain high returns.
• Durable, organic growth — growth driven by the underlying business rather than one-off acquisitions or financial engineering.
• Balance-sheet strength — modest leverage and the financial flexibility to weather downturns.
• Cash generation & shareholder returns — steady free cash flow and a consistent record of returning cash through dividends and buybacks.
• Valuation discipline — a preference for quality available at a reasonable price rather than at any price.
• Risk & stability — lower fundamental and price-based risk, with an eye to structural threats to the business.

These factors are combined into a single quality assessment used to rank candidates. The emphasis is on businesses that score well across the board rather than excelling on one dimension alone.

AI-Assisted Analysis

Most of the Index’s factors are computed directly from reported financials and market data. Two forward-looking dimensions also draw on AI language-model analysis:

• Growth analysis — assessing the durability and organic nature of each company’s growth outlook from its disclosures and reported results.
• Risk analysis — surfacing and characterizing the qualitative risk factors a company discloses, so that structural threats to the business are reflected in its score.

These model-driven assessments are converted into standardized factor scores and combined with the quantitative factors under the same rules-based framework. The language models inform the score; they do not override the rules that govern selection and weighting.

Construction

The Index holds a concentrated portfolio of the highest-ranked eligible companies. Holdings are weighted to reflect both company size and quality, with a ceiling on any single position so that no one name dominates the Index. Partnerships and other ineligible structures are excluded.

Rebalancing

The Index is reviewed and rebalanced on a regular calendar schedule. A retention preference for existing holdings limits unnecessary turnover from small changes in rank, while a periodic full refresh keeps the roster aligned with the current screen. Between rebalances, the Index monitors holdings for material deterioration and can reduce or remove a position when warranted.

Data & Governance

The Index draws on public company filings, market data, and AI language-model analysis to assess each company. The methodology is versioned, and material changes are recorded with an effective date. All inputs — including model outputs — are subject to error, revision, and delay.

This page provides a high-level overview of the Index methodology and is not a complete specification.