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S&P Dow Jones Indices has launched the S&P Europe 350 Equal Weight Index (EWI), an equally weighted version of the widely followed S&P Europe 350 Index of leading European blue chip companies.
The S&P Europe 350 is an equity index drawn from 17 major European markets and intends to provide investors with a tradable and easily replicable snapshot of investable Europe.
The new index has the potential to serve as an underlying reference for index-linked products such as exchange-traded funds (ETFs).
“Despite its simplicity, equal-weighting remains one of the most popular forms of alternative weighting,” says Michael Orzano, associate director of global equity indices at S&P Dow Jones Indices. “The S&P Europe 350 EWI allows investors to measure the European equity markets while substantially reducing the contribution of the largest companies.”
By attributing the same weight to each constituent, the index provides a more diversified exposure, avoiding both the dominance of a small group of large-cap stocks in the index and the trend following bias of market-cap indices.
Earlier this month, S&P Dow Jones Indices announced the launch of the S&P Europe 350 Low Volatility High Dividend Index which is designed to calculate the performance of 50 high-yielding companies within the S&P Europe 350. Both indices were developed in response to the market’s growing demand for non-market capitalization weighted versions of the S&P Europe 350.
The S&P Europe 350 offers investors a benchmark that contains the largest and most liquid stocks from the European markets. The 350 stocks have been selected on the basis of their size, liquidity, sector representation and country representation.
Investors looking for equal weight exposure to European stocks could consider the Ossiam Stoxx Europe 600 Equal Weight NR UCITS ETF 1C (EUR), which is listed on multiple European exchanges including Euronext Paris, Xetra, Borsa Italiana, SIX Swiss Exchange and the London Stock Exchange.
The fund holds the same constituents as the market capitalization weighted Stoxx Europe 600 Index, but each company is allocated an equal weight (0.1667% in normal circumstances) at each quarterly rebalancing date.