MV Index Solutions launches suite of equally weighted country indices

Jun 5th, 2017 | By | Category: Equities

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MV Index Solutions has launched a suite of equally weighted indices targeting the largest and most liquid equity exposures in Germany, Japan, South Korea, the United Kingdom and Mexico. The indices have been designed to form the basis for future investment products such as exchange-traded funds.

Thomas Kettner, Managing Director at MV Index Solutions

Thomas Kettner, Managing Director at MV Index Solutions.

As defined by the MVIS pure-play concept, non-local companies generating at least 50% of their revenues in those countries are also included in the indices. Each index is reviewed and rebalanced on a quarterly schedule.

Proponents of equal-weighted indices highlight that the weighting methodology avoids overweighting the largest caps in the index universe, a criticism of traditional market cap-weighted approaches.

Thomas Kettner, Managing Director at MV Index Solutions, said: “Equal weighting reduces concentration risk as it results in a more balanced diversification among index components. It can also lead to a more diversified sector exposure. By assigning each index component an equal weight, the index provides higher exposure to previously underrepresented stocks.”

By rebalancing to its target weights, the indices reduce exposure to potentially overvalued stocks and tend to outperform in non-trending, mean-reverting markets.

The new line-up of indices include the MVIS Germany Index, MVIS United Kingdom Index, MVIS Japan Index, and MVIS South Korea Index. Additionally, market cap weighted versions for the respective markets have been added to regular MV Index Solution’s country index line-up. These indices are weighted by float-adjusted market cap, applying an 8% capping scheme.

This new suite of market cap-weighted indices and the equal weight indices are calculated in US dollars as price and total return net indices.

MVIS currently also offers a broad range of country indices focusing on emerging markets such as Russia, India, and Brazil.

“The new indices are expanding our exposure to developed markets and our suite of equal weight indices. Our first equal weight strategy, the MVIS Australia Equal Weight Index that already serves as underlying for a successful ETF, has outperformed the traditional market capitalization-weighted Australia Index in most years since its inception.”

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