Solactive, a Germany-based index provider, has launched the Solactive Swiss Equal-Weight Net Total Return Index, an index that tracks the performance of an equally weighted allocation of Swiss large-cap stocks.

Steffen Scheuble, CEO of Solactive

In contrast to market capitalisation-weighted indices, which weight constituents based on the market value at which they are currently trading, equal-weighted indices sever the link between valuation and weight.

This strategy avoids the possibility of overly concentrated positions in highly valued stocks which can occur in market cap-weighted indices.

According to research from UBS, investing with an equal-weight approach has shown to exhibit attractive long-term risk and return properties versus traditional market-cap weighted indices. This is due to the larger relative exposure to value and smaller-sized companies. Also known as risk-premiums, this bias to value and small size companies has historically been rewarded.

The index selects the top 20 stocks, according to market capitalization, listed and domiciled in Switzerland which have a 3-month average daily volume of CHF 5 million or more. The index is rebalanced on a quarterly basis.

The index has been constructed so as to be suitable to underlie index-linked investment products such as exchange-traded funds and structured products. Initially, the first licensing of the index has been to UBS as the reference for a structured product available on the SIX Structured Products Exchange.

Steffen Scheuble, CEO of Solactive, commented: “We are pleased to fill in another gap in the market for UBS, with the launch of this equal-weight index following the Swiss market via its top 20 blue chips, which offers a new approach to a well-known market.”

The Solactive Swiss Equal-Weight Index is a net total return index calculated and published in CHF.