S&P Dow Jones Indices (S&P DJI) has created the S&P500 Low Volatility Enhanced Index, adding to its range of factor-based indices.
It aims to balance low volatility, yield and liquidity, and has been designed to be an investable index. The index has been licensed to Deutsche Bank to be deployed in structured solutions and exchange-traded products (ETPs).
“The S&P500 Low Volatility Enhanced Index implements the low beta investment concept in a simple and transparent way,” said Giulio Alfinito, head of equity investor products, Europe, at Deutsche Bank. “The index benefits from an innovative liquidity based weighting system and low exposure to market risk, making it a potential underlying asset for capital-protected structured products.”
The S&P 500 Low Volatility Enhanced Index comprises 50 constituents from the S&P500 benchmark index.
“This simple, but innovative, index seeks to offer investors a means of measuring low volatility strategies, which tend to outperform in times of market turbulence,” said Vinit Srivastava, senior director, strategic indices at S&P Dow Jones Indices.
The constituents that have a dividend yield less than the S&P500 are removed from the selection list. The remaining stocks are then ranked by their beta, which measures the sensitivity of the stocks’ returns relative to the S&P500 index. The 50 stocks with the lowest beta are selected for the index.
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