S&P Dow Jones expands smart beta offering; unveils S&P Quality Indices

Jul 27th, 2014 | By | Category: ETF and Index News

S&P Dow Jones Indices, one of the world’s leading providers of indices to exchange-traded funds, has unveiled the S&P Quality Indices, a new family of indices tracking “high quality” stocks.

S&P Dow Jones expands smart beta offering; unveils S&P Quality Indices

Vinit Srivastava, Senior Director of Strategy Indices at S&P Dow Jones Indices.

The indices are designed to measure the performance of stocks which score well on three fundamental measures of quality: return on equity, accruals ratio and financial leverage ratio.

The family consists of 12 headline indices that cover major global regions and countries.

Each index is constructed from the components of an existing S&P benchmark index, with constituents weighted according to their quality score and float-adjusted market capitalization.

The indices, which are likely to gain the attention of ETF providers, fall within a branch of index construction known as “smart beta”. Also known as alternative, advanced or strategic beta, smart beta refers to a set of approaches that deviate from traditional market capitalisation-weighted models by selecting stocks according to systematic rules-based strategies and/or by weighting securities based on alternative non market-cap weighting methodologies.

The new indices follow the launch of other smart beta strategies by the provider, including low beta and intrinsic value offerings unveiled earlier this year. S&P Dow Jones was one of the first mainstream index providers to introduce alternatively weighted indices, starting in 2003 with the introduction of an equal-weighted version of the S&P 500 Index.

Vinit Srivastava, Senior Director of Strategy Indices at S&P Dow Jones Indices, said: “Quality is a risk factor that is distinct from other known factors like size, value, momentum, and low volatility. The launch of the S&P Quality Index family provides investors with a factor-based benchmark that captures the characteristics of high quality companies.”

The full index family is as follows:

S&P Quality Global LargeMidCap Index
S&P Quality Developed LargeMidCap Index
S&P Quality Developed Ex-U.S. LargeMidCap Index
S&P Quality Developed Ex-Japan LargeMidCap Index
S&P Quality Emerging LargeMidCap Index
S&P Quality Europe LargeMidCap Index
S&P Europe 350 Quality
S&P Quality Pan Asia LargeMidCap Index
S&P Quality Pan Asia Ex-Japan LargeMidCap Index
S&P Quality Japan LargeMidCap Index
S&P 500 Quality Index
S&P Quality United States LargeMidCap Index

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