Index providers develop thematic Covid-19 benchmarks; ETFs in pipeline

Apr 29th, 2020 | By | Category: ETF and Index News

Sensing an opportunity, index providers are developing new thematic indices capturing trends associated with the Covid-19 pandemic.

Index providers develop thematic COVID-19 benchmarks

Both Solactive and EQM Indexes have released indices that seek to capture investment trends related to the Covid-19 pandemic.

Two such providers are Frankfurt-based Solactive and San Diego-based EQM Indexes.

Solactive has unveiled the Solactive Remote Work Index, tracking a portfolio of companies that specialize in providing products that focus on the ability to work from home.

Regulatory documents filed with the US Securities and Exchange Commission indicate the index has already been licensed and is due to underlie a new ETF from US sponsor Direxion.

The Direxion Work From Home ETF is expected to launch on NYSE Arca later this year and will come with ticker WFH US.

For the uninitiated, WFH is an abbreviation for Work (or Working) From Home.

Direxion, historically known as a specialist provider of inverse and leveraged ETFs, has been seeking to broaden its lineup to appeal to more buy-and-hold investors. The firm launched three non-leveraged thematic ETFs in February as part of that strategy.

The Solactive Remote Work Index will select its constituents from a universe of US equities and American Depository Receipts with average daily trading volume greater than $5 million.

Selection is driven by Solactive’s proprietary Natural Language Processing engine called ARTIS (Algorithmic Theme Identification System) which provides potential constituents with a thematic score indicating how closely aligned the firm is to the underlying theme. ARTIS analyses large volumes of company reports, financial news, and business descriptions in calculating thematic scores.

The index is comprised of 40 securities, consisting of the ten stocks that are most aligned to each of the following four business fields: cloud technologies, cybersecurity, online project and document management, and remote communications.

Constituents are weighted equally, and the index is rebalanced on a semi-annual basis using buffer rules to limit unnecessary turnover.

Meanwhile, EQM Indexes has introduced four thematic indices related to the Covid-19 pandemic. The suite includes a ‘Work from Home’ index, as well as indices that track companies aligned with ‘Stay at Home’, ‘Covid-19 Stocks’, and ‘Global Pandemic Disruption’ investment themes.

The EQM Work from Home Index tracks companies benefiting from the emerging work-from-home remote economy, while the EQM Stay at Home Index tracks companies benefitting from people spending more time at home.

The EQM Covid-19 Stock Index tracks companies developing therapies, vaccines, and diagnostic tests in response to Covid-19, while the EQM Global Pandemic Disruption Index tracks companies most disrupted by a global pandemic including travel bookings, live entertainment, health clubs, airlines, cruises, casinos, restaurants, and hospitality.

Jane Edmondson, EQM Indexes’ CEO and co-Founder, commented, “Our goal was to provide timely access to these investment ideas, which are not trades, but capture longer-term thematic trends, which will prevail post the resolution of the Covid-19 global pandemic.”

Full methodology documents for the EQM indices are not available yet; however, Edmondson notes these indices will have a global reach and will use an equally weighted methodology.

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