STOXX introduces European low risk weighted index

Oct 9th, 2012 | By | Category: ETF and Index News

STOXX has announced the launch of the STOXX Europe Low Risk Weighted 100 Index. The index represents a hypothetical investment portfolio that selects the 100 constituents of the STOXX Europe 600 Index with the lowest volatility.

STOXX introduces European low risk weighted index

The STOXX Europe Low Risk Weighted 100 Index selects the 100 constituents of the STOXX Europe 600 Index with the lowest volatility.

The index is designed to act both as a benchmark for actively managed funds and as an underlying to exchange-traded funds (ETFs) and other investable products.

Constituents are weighted inversely by their volatility in order to achieve a minimal risk in the STOXX Europe Low Risk Weighted 100 Index: the lower a constituents twelve month volatility is, the higher is its weight in the index. The maximum constituent weight is capped at 10% to prevent the index from being dominated by individual companies.

Since inception (March 2001), the index has exhibited an annualised volatility of 13.28%, while over the same timeframe the underlying STOXX Europe 600 Index has exhibited annualised volatility of 21.16%.

“Market participants appetite for innovative, low-volatility investment strategies that are following a clear set of rules is still growing,” said Hartmut Graf, chief executive officer, STOXX. “With the launch of the STOXX Europe Low Risk Weighted 100 Index, we are offering investors an innovative index, which is designed to single out the low-volatility stocks in Europe’s leading benchmark; thus providing exposure to this market, but with the least possible portfolio volatility.”

The STOXX Europe Low Risk Weighted 100 Index is calculated in price, net and gross return versions and available in Euro and USD. It is reviewed quarterly in February, May, August and November after the review of the underlying STOXX Europe 600 index.

The launch provides an alternative to STOXX’s existing STOXX+ Minimum Variance index family, which includes the STOXX+ Europe 600 Minimum Variance Index, and follows similar moves by competitors FTSE and S&P Dow Jones, which both recently expanded their “low vol” line-up to include new European indices.

On 1 August, FTSE rolled out a number of “minimum variance” indices including the FTSE Developed Europe Minimum Variance Index, the FTSE Developed Europe ex UK Minimum Variance Index and the FTSE Eurobloc Minimum Variance Index, while, on 21 August, S&P introduced the S&P Europe 350 Low Volatility Index.

Russell and MSCI also offer comprehensive suites of low-volatility indices.

Further versions of the index concept are also available:

New Index Constituents Parent Index
STOXX Europe Low Risk Weighted 100 100 STOXX Europe 600 Index
STOXX Europe Low Risk Weighted 200 200 STOXX Europe 600 Index
STOXX Europe Low Risk Weighted 300 300 STOXX Europe 600 Index
EURO STOXX Low Risk Weighted 50 50 EURO STOXX Index
EURO STOXX Low Risk Weighted 100 100 EURO STOXX Index
EURO STOXX Low Risk Weighted 150 150 EURO STOXX Index
EURO STOXX 50 Low Risk Weighted 30 30 EURO STOXX 50 Index
EURO STOXX 50 Low Risk Weighted 50 EURO STOXX 50 Index

 

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