FTSE Launches Smart Beta Index Range

August 05, 2014

Global index provider FTSE has launched a new smart beta index range that will be made up of six single factor indexes as it builds out its presence in the sector.

The initial launch phase of the indexes will consist of six single factor indices representing a tilt in a specific direction. These are: illiquidity, momentum, quality, size, value and volatility based on the market cap weighted FTSE developed and emerging market indexes.

Indexes with multiple factor tilts will then follow this and will include a wider geographic span of indexes and factor tilts on non-market cap weighted indexes.

Peter Gunthorp, managing director, research & analytics at FTSE, commented: “The new index series applies a consistent and transparent methodology to achieving a controlled factor tilt to any underlying index. This allows investors the granularity and consistency that they require when developing benchmarking tools and results in a mechanism for the creation of index tracking funds and derivatives.”

FTSE saw assets in exchange traded funds (ETFs) linked to its indexes rise by 31percent from $163 billion in June 2013 to $213 billion as of June this year, according to LSEG's interim management statement from 15 July.

This also coincided with the run up to the London Stock Exchange’s acquisition of Russell's index business, making it the third largest index provider in the world.

Ben Seager-Scott, senior analyst at advisory firm Bestinvest, also said at the time that while the bulk of the assets will still tend to go to the providers of these big indices like FTSE and MSCI, he sees potential changes around the periphery as providers develop alternative beta and income-seeking products.

“There are a whole host of different strategies being developed, some of which are likely to be incredibly popular and other which will probably flop,” he said. “Since these are new strategies it could be anyone’s for the taking and it will be interesting to see who the winners in this space will be.”




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