Thomson Reuters has launched the Thomson Reuters Western Eurozone Mid & Small Cap Total Return Index, a market capitalization weighted reference for the performance of small- and mid-cap companies listed in the Western Eurozone bloc. The index may be licensed by exchange-traded fund providers for product development.
The Thomson Reuters Western Eurozone Mid & Small Cap Total Return Index represents the performance of small- and mid-cap companies listed in the Western Eurozone bloc.
Stephan Flagel, Head of Benchmarks and Indices at Thomson Reuters, commented: “Asset and investment managers are constantly searching for pockets of investment opportunity within specific sectors of the market. As a leading provider of indices, we are keen to work with investment professionals to provide differentiated content and solutions which provides them the exposure, transparency and insight necessary in order to deliver greater value to their clients.”
Securities are selected from the following European countries: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Portugal and Spain. As of 31 October 2016 the largest country exposures are to Germany (23%), France (16%), Italy (14%), Spain (11%) and the Netherlands (10%).
Securities between €500m and €5bn are eligible for inclusion. By using market cap as the primary selection screen and free-float as the second criteria, the methodology ensures firms are truly representative of their size category. The index is rebalanced semi-annually in April and October.
Currently composed of 299 securities, the index’s largest sector exposures are to financials (25%), industrials (18%), consumer discretionary (16%), materials (11%) and technology (8%). The index is well diversified across individual holdings with the largest constituent having a weight of just 1.3%.
Using back-tested data the index has returned 49.4% since its inception on 31 March 2011. Its annualized standard deviation of return was 15.9%. These results compare favourably against the broader Thomson Reuters Eurozone Countries TR Index which has returned a total 9.0% with an annualized standard deviation of 19.0% over the same period. This results in a superior Sharpe ratio of 0.53 for the small- and mid-cap index compared to 0.18 for the Thomson Reuters Eurozone Countries TR Index.
Source: Thomson Reuters.
Investors looking for Eurozone mid- or small-cap exposure through the low cost ETF wrapper may wish to consider the following funds.
The UBS ETF MSCI EMU Small Cap UCITS ETF (LON: UB69) tracks the MSCI EMU Small Cap Index and has €28m in assets under management (AUM). It is the cheapest ETF to track the aforementioned index at a total expense ratio (TER) of 0.33%. Lyxor and iShares offer similar funds at TERs of 0.40% and 0.58% respectively. The iShares fund is the largest of the three with AUM of €430m.
The €120m iShares MSCI EMU Mid Cap UCITS ETF (LON: EMUM) offers access to the mid-cap segment of the Eurozone equities market. It has a TER of 0.49%.