STOXX has launched the EURO STOXX International Exposure and STOXX Japan International Exposure indices, which have been licensed to Source to underlie new ETFs expected in June 2015.
The Indices provide exposure to companies that generate a substantial portion of their revenue outside their home region, allowing market participants to express views on those companies that are well positioned to profit from currency depreciation and higher growth in non-domestic markets.
“The continued globalisation of world markets leads to increasingly interconnected economies. Companies that operate globally generate more and more revenue outside of their home markets, and thus also become subject to international economic conditions,” says Hartmut Graf, chief executive officer, STOXX Limited. “With the launch of the STOXX International Exposure Indices, we provide market participants with innovative, rules-based and transparent tools to add more international exposure to their portfolios, through an investment in local companies.”
Lee Kranefuss, chairman of Source, commented: “At Source, one of our core objectives is to provide investors with better portfolio building blocks, so we are delighted to be able to use these innovative new indices. Revenue-based indices like STOXX’s economic exposure family are an important part of the future of indexing, because they allow investors to express much more precise views than possible with traditional indices that look only at where a company is domiciled or listed.”
The index universe for the EURO STOXX International Exposure and STOXX Japan International Exposure indices are the EURO STOXX and STOXX Japan 600 indices, respectively. The two indices are based on a transparent and easily understood methodology: all companies that generate at least 50 per cent of revenue outside of their home region are selected for inclusion in each index. Components are weighted by a combination of free-float adjusted market cap and the exposure factor, in order to maximise the exposure to foreign revenue while still preserving a link to size, and are subject to a 5 per cent cap.
All companies’ geographic revenue splits are collected from their annual reports as a first step. To accurately assign reported revenue to individual countries – if not already included in the annual report – STOXX has developed a proprietary revenue estimator which is based on country-dependent figures on exports of goods and services. Data sources used for the revenue estimation include the publicly available UN Comtrade and UN ServiceTrade Databases, which contain data on exported goods and services among countries, as well as World Bank data. The indices are reviewed annually in September, using the latest available data.
The STOXX International Exposure indices are calculated in price, net and gross return versions and available hedged into Euro, US dollars, GB pounds (EURO STOXX International Exposure) and Japanese Yen (STOXX Japan International Exposure).
