Amundi, a leading European provider of exchange-traded funds, has announced the launch of a smart beta strategy ETF providing exposure to European companies that are undertaking share buyback programmes. The fund has been listed on the London Stock Exchange.
Valérie Baudson, CEO at Amundi ETF, Indexing and Smart Beta.
The ETF is the first to track the MSCI Europe Equal Weighted Buyback Yield Index and has been launched in response to client demand following the success of their US-focused buyback ETF.
The index has outperformed its parent index, the MSCI Europe, in 13 of the last 14 years.
Valerie Baudson, CEO at Amundi ETF, Indexing and Smart Beta, said: “This innovative ETF adds to our smart beta range and reinforces the positioning of Amundi as a leading innovative player in the European ETF market.”
According to Amundi, the ETF is designed for investors who are seeking yield from the European equity market via a return-oriented smart beta approach, by providing exposure to companies performing share buybacks, a way of distributing value to shareholders which is likely to grow in Europe.
Share buybacks, like dividends, are a method for corporations to return capital to shareholders. US companies have been following buyback strategies for many years and Amundi expect this trend to become more prevalent amongst European companies as a more efficient use of cash in a low rate environment.
Constituents are selected from the parent index based on their buyback yield over the previous 12 months. Companies with a yield higher than 0.1% will be included in the index; this cutoff is used in order to avoid including companies who are buying shares to offset other sources of share issuance, for example, from an Employee Stock Options Program. Buyback yield is calculated as a ratio of the change in shares outstanding over the past 12 months to the current number of shares outstanding.
An equal weight methodology is applied to the index for the purposes of diversification and providing a purer exposure to the share buyback theme with reduced bias to any one constituent.
As of 31 August 2015, the index held 59 constituents across the United Kingdom (33.7%) Netherlands (10.7%), France (7.5%), Denmark (7.3%), Spain (7.1%) and other countries. By sector, the index was most heavily exposed to industrials (25.5%), followed by consumer staples (12.9%), consumer discretionary (12.4%), materials (10.8%) and healthcare (9.8%).
The ETF has a total expense ratio of 0.3% and will be made available in Paris and subsequently on other major European exchanges.