Index provider FTSE Russell and smart beta strategy specialist Research Affiliates have launched a new family of smart beta indexes – the FTSE RAFI Equity Income Index Series.
The benchmarks will track high dividend-paying stocks which are screened to target sustainable income. The indexes are weighted according to fundamental measures, as opposed to market capitalisation.
Source, one of Europe’s largest ETF issuers, contributed to the development of the indexes in response to enquiries from investors for a better-structured dividend-focused strategy. Source will be the first ETF provider to license the index series, and a family of ETFs linked to the benchmarks is set to be launched by Source later this year in Europe.
The FTSE RAFI Equity Income Index Series builds on the success of the leading smart beta partnership between FTSE Russell and Research Affiliates, which dates back to 2005. With one of the longest track records in the smart beta industry, FTSE RAFI indexes have been widely acknowledged and adopted as the underlying foundation for a broad variety of investable products in the form of ETFs, managed accounts and mutual funds.
As of 31 March 2015, investable products linked to indexes developed by FTSE Russell and Research Affiliates have approximately USD75 billion of AUM.
Caroline O'Shaughnessy, Managing Director, Sales and Marketing, FTSE Russell, says: “As our partnership with Research Affiliates reaches its tenth year, we are proud that our close collaboration continues to yield innovative benchmarks that respond to investor needs. Source’s licensing of the FTSE RAFI Equity Income Index Series reflects this, as alternative benchmarks provide a critical, low cost investment solution to a wide range of market participants.”
Jason Hsu, Co-Founder and Vice Chairman, Research Affiliates, says: “For a good number of investors, accessing sustainable, high income remains an unmet need. Yields in fixed income remain historically low, while within the equity space, existing high dividend strategies tend to tilt toward low growth sectors or poor quality stocks. To address this gap in the market, Research Affiliates and FTSE Russell are introducing these new smart beta indexes, which we built in close collaboration with Source. The FTSE RAFI Equity Income Index Series includes high dividends from companies that have been screened for their ability to sustain their dividends.”
Peter Thompson, President, Source, says: “We are delighted to work with FTSE Russell and Research Affiliates in the creation and licensing of these FTSE RAFI indexes. We have seen the increasing appetite for smart beta ETFs, and particularly for dividend-focused strategies like these, and look forward to working with Research Affiliates and FTSE Russell to meet the investor need for this kind of exposure.”
In common with all FTSE Russell indexes, the index series is managed according to a publicly available set of rules and overseen by an independent committee of market practitioners.