Xact lists Nordic smart beta ETF on Nasdaq Stockholm

Apr 6th, 2017 | By | Category: Equities

Xact has unveiled the XACT Nordic High Dividend Low Volatility UCITS ETF (Stockholm: XACTHDIV), providing exposure to stable, dividend-paying equities listed in the Nordic region. The fund is the first smart beta ETF to be launched by Xact.

Nordic High Div Low Vol ETF

The XACT Nordic High Dividend Low Volatility UCITS ETF tracks stocks from the Nordic region (Denmark, Finland, Norway and Sweden) with high dividend and low volatility characteristics.

Pär Nürnberg, Chief Executive of Xact Kapitalförvaltning, commented: “It’s very pleasing today to list XACT Nordic High Dividend Low Volatility, and to bring the first Nordic smart beta ETF to the market. With our new ETF we aim to meet the market’s demand for stable, dividend-paying equities with a smart exposure in a smart format – and also at a low cost.”

The fund tracks the Handelsbanken Nordic Smart Beta Index. The starting universe for the index’s methodology is the Solactive Nordic 150 GTR Index, which tracks the 150 most liquid shares listed in the Nordic region covering Denmark, Finland, Norway and Sweden. The methodology then selects the 50 least volatile and highest yielding single stocks and assigns a weight to each component based on scoring related to its observed dividend yield and the inverse of its historical volatility. The index is rebalanced semi-annually and the largest current constituent is Industrivärden C with a weight of 2.6%. (Data as of 7 April 2017)

The ETF has a total expense ratio of 0.30%.

The parent index was recently launched by Solactive and, using back-tested data to December 2011, has shown strong annual returns of 18.5% with a per annum standard deviation of 8.4% for an impressive Sharpe ratio of 2.2. These results indicate the general high return and low volatility of the broad Nordic region, driven by attractive macroeconomic environments as well as strong, productive industries. The Xact ETF strategy attempts to select the stocks with leading characteristics within this hospitable environment.

The methodology is similar to the suite of five PowerShares high div low vol UCITS ETFs. The range of four funds, which targets US, UK, Eurozone, and emerging markets exposures, seeks to select stocks based on their 12-month historical volatility and 12-month historical dividend yield. The stocks are initially screened by dividend yield with the top ranked securities passing to the second round, before being screened again for low volatility. The final constituents are weighted according to dividend yield with caps per issuer used to prevent overconcentration.

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