Amundi to launch S&P 500 buyback ETF

Feb 9th, 2015 | By | Category: Equities

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Amundi, a leading European provider of exchange-traded funds, has unveiled plans to launch the first ETF in Europe to track the S&P 500 Buyback Index.

Amundi to launch S&P 500 buyback ETF

Stock buybacks have become the dominant form of corporate payout on Wall Street.

The fund, which is scheduled to list on Euronext Paris later this month, with subsequent cross-listings on the other main European markets, will provide exposure to those constituents of the S&P 500 with the most meaningful stock buyback (also known as share repurchase) programmes.

The S&P 500 includes 500 leading US companies and captures approximately 80% coverage of available market capitalization. It is widely regarded as the best single gauge of large-cap US equities.

The index for the new ETF, the S&P 500 Buyback Index, is based on this index and measures the performance of the top 100 stocks with the highest buyback ratio over the previous 12 months. Constituents are equally weighted, enabling a pure exposure to the buyback theme. The index has outperformed the S&P 500 for 17 out of the last 20 years.

The buyback investment theme is supported by a sustainable trend in corporate payout policy in the US, observed since the end of the 1990s, whereby share repurchases exceed cash dividends and have become the dominant form of corporate payout.

Share buyback programmes can be triggered by strong balance sheets or undervalued stocks: either a cash rich company chooses to return capital to shareholders or, if their stock is undervalued, they choose to take advantage of this low valuation.

Commenting on the launch, Valerie Baudson, Global Head of ETF and Indexing at Amundi, said: “We are delighted to once again bring efficient innovation to the market. The new S&P 500 Buyback ETF adds to Amundi’s US equity range while meeting growing demand from investors for smart beta investment tools.”

The fund has a total expense ratio of 0.15%.

The buyback theme is proving to be a fertile source of new funds, with two other buyback-linked ETFs launched in Europe in recent months. These are the iShares US Equity Buyback Achievers UCITS ETF (BACK), linked to the Nasdaq US Buyback Achievers Select Index, and the PowerShares Global Buyback Achievers UCITS ETF (BUYB) linked to the Nasdaq Global Buyback Achievers Index.

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