FTSE Russell has expanded its FTSE Global Factor Index Series with the launch of two additional benchmarks intended to capture dividend yield and momentum factors.
The new indices complement the existing single factors already calculated by FTSE Russell including liquidity, residual momentum, quality, size, value and volatility. The two new additions are based on the FTSE Developed and FTSE Emerging indices and use a common framework and methodology to provide controlled exposure to a target factor, while considering levels of diversification and capacity.
The extension of the index series reflects the high level of client interest around index tools that can be used to capture specific factors, said Peter Gunthorp (pictured), managing director, research and analytics at FTSE Russell.
“As highlighted in the 2015 FTSE Russell Smart Beta Survey, asset owners and their consultants are increasingly evaluating and adopting more sophisticated index strategies,” said Gunthorp. “As alternatively weighted and factor indexes grow in popularity, we will continue to expand our offering to meet this growing demand. FTSE Russell will also support the expansion by providing market participants with education, information and index tools around these new approaches.”
The new indices that have been included in the FTSE Global Factor Index Series are suitable for structured products with either single or multi-factor objectives, said Gunthorp. “FTSE Russell is increasingly seeing interest for both FTSE Russell and bespoke client-driven smart beta solutions, and demand is particularly strong around factor combinations with a strong rationale such as quality and yield; quality and value; and volatility and value,” said Gunthorp.
Designed for use by institutions as performance benchmarks and risk management tools, the FTSE Global Factor Index Series has also been adopted by product issuers as the foundation for new exchange-traded funds (ETFs) and funds.
Most recently O’Shares, a new ETF issuer founded by US television personality Kevin O’Leary, selected the FTSE Global Factor Index Series for the O’Shares US Quality Dividend ETF, its debut product.
The launch follows FTSE Russell resuming its partnership with Research Affiliates, a pioneer in smart beta strategies, to launch the FTSE RAFI Equity Income Index Series, a new smart beta family tracking high dividend-paying stocks which are screened to target sustainable income which was licensed to ETF provider Source to develop a dividend-focused family of ETFs.
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