Germany-based index provider Solactive AG and global thematic funds specialist Sarasin & Partners have unveiled a suite of five new indices targeting smart beta equity exposure in the UK, Europe, the US, and globally.
Steffen Scheuble, CEO of Solactive
The Sarasin’s Systematic Efficient Approach Indices (SSEA Indices) are designed to provide core building blocks for asset allocators. They aim to outperform the market-cap over the medium-long term and across multiple market cycles by tilting exposure to three proven drivers of return: momentum, low volatility and size.
Steffen Scheuble, CEO, Solactive, said in a statement: “Solactive is happy to announce our cooperation with Sarasin & Partners on the calculation of indices that not only aim to outperform country markets but also employ a sophisticated and proven methodology – a methodology that is passionate about obtaining a sustainable profit in the mid-long term.”
The methodology behind the index series ranks the stocks within the respective eligible universe according to their return momentum and volatility. The process uses a proprietary formula which the firms claim improves upon the traditional Sharpe ratio by considering the shape of the stock’s underlying trend. In this way, stocks with strong, consistent positive trends that exhibit minimal volatility are favoured. The highest ranking 50% of stocks are chosen for final inclusion. Lastly, all stocks are equally weighted to increase diversification benefits and tilt the final index towards smaller stocks. The indices are rebalanced at the beginning of each month.
Andrea Nardon, Partner, Sarasin & Partners LLP, added: “The epic rise and wide range of alternative weighting and factor indices, AKA Smart Beta products, may well leave investors overwhelmed as to which risk factor to choose and when. We are proud to deliver a robust, transparent, cost-efficient methodology that enables investors to gain core equity exposure, enhanced portfolio efficiency, diversification and broad market representation. The methodology, which is squarely focused on efficiency, is uniquely positioned to benefit from exposure to three proven risk premia whilst avoiding problems inherent to multi-factor optimization.”
The full range of newly launched indices include the:
Sarasin Efficient flyer – UK Large Cap
Sarasin Efficient flyer – UK Mid Cap
Sarasin Efficient flyer – US
Sarasin Efficient flyer – Europe
Sarasin Efficient flyer – Global Equities
According to sources at Sarasin, the firm is exploring opportunities to license these indices to third parties for product creation as well as considering rolling out ETFs based on these strategies.