Solactive has launched a family of European factor indices, which will be used as the reference indices for five Invesco PowerShares ETFs.
Specifically, the Solactive Tradable European Factor Index Series includes five indices targeting strategies such as value, quality, low beta, price momentum, and earnings momentum.
The company writes that each index in the Solactive Tradable European Factor Index Series is composed of 50 European-listed companies chosen from a starting universe of 675 stocks. The selected companies have a high degree of exposure to the equity risk factor specified for that index, and are subject to certain liquidity requirements, and sector caps in order to avoid industry concentration. The weight of each component is assigned depending on how its liquidity compares with that of other stocks in the same index. In this way, the index methodology allows investors to gain exposure to factors, while tilting the composition towards more liquid companies.