Euronext introduces the Euronext BeNe 40 Equal Weight Index

Sep 28th, 2015 | By | Category: ETF and Index News

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Euronext, a leading European exchange operator and index provider, has launched the Euronext BeNe 40 Equal Weight Index, an alternatively weighted index tracking the 40 most traded companies in the BEL 20 and AEX indices.

Euronext introduces the Euronext BeNe 40 Equal Weight Index

The index tracks an equally weighted allocation of Belgian and Dutch stocks.

“This newly launched index illustrates our efforts and commitment to respond quickly to the market’s needs and underscores the strength of Euronext’s indices as an underlying for all types of products,” explained Michael Hodgson, Head of Licensing, Market and Global Sales at Euronext. “Additionally, the new index will help investors to gain better insight in the overall performance of the Dutch and Belgian stock markets.”

The index is designed to act as the basis for index-linked products such as exchange-traded funds and structured products. Paris-based asset manager Natixis, parent of smart beta ETF specialist Ossiam, has already licensed the index for the creation of structured notes.

Eric Le Brusq, Global Head of Equity Derivatives Sales and Financial Engineering for Natixis, commented: “This index will bring a simple and direct access to the best traded shares of both the Belgian and the Dutch market. It is a real trigger for all investors in the area, and a real pleasure for Natixis to be partner of Euronext to promote this unique underlying.”

Equally weighted indices, such as this, are one of the most straightforward examples of smart beta investing. Traditional indices weight constituents by market capitalisation, which is the product of a constituent’s price and the amount of shares outstanding in that company. Following an indexing strategy driven by price can lead to investment in some overvalued companies. By giving the same weight to each constituent, the link with price is severed. The result is an index which gives greater weight to smaller companies and de-emphasises larger market cap companies. Historically this has led to higher risk-adjusted returns over long-term time horizons as smaller companies have tended to produce higher returns and overpriced stocks are avoided.

The Euronext BeNe 40 Equal Weight Index is calculated as a price index, net return index, gross return index and an excess return index, and is rebalanced to equal weight at each quarterly review.

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