New York-based Indxx has launched a new thematic equity index, the Indxx Subscription Economy Index, tracking companies that primarily provide services through subscription-based models.
The index provides exposure to companies deriving the majority of their revenue from a subscription-based model.
The index taps into the thriving thematic investing scene and has been designed to serve as an underlying reference for investment products such ETFs.
Constituents are selected from a universe of developed and emerging market stocks with market capitalizations above $500 million that also satisfy liquidity requirements.
Firms must also have positive revenue growth over the past two years to be eligible for selection.
The methodology screens for firms deriving a majority of their revenue from subscriptions related to several sub-themes including software, telecommunications, media, internet of things, gaming, business assistance, e-commerce, retail, publishing, automotive, and apparel.
The largest 50 pure-play companies are selected to form the final index. If fewer than 50 pure-play firms are eligible, the methodology includes firms that derive between 20% and 50% of their revenues from subscriptions linked to the above sub-themes until the quota is met.
Constituents are weighted by float-adjusted market capitalization subject to a cap of 4.9% and a floor of 0.3% per stock. The index is reconstituted and rebalanced annually in December with buffer rules helping to limit unnecessary turnover.
Rahul Sen Sharma, Managing Partner at Indxx, commented, “Consumer consumption patterns are continuously evolving, and we are now in an important transition period where people are moving from product ownership to ‘usership’ where people prefer to use services and products rather than own them.
“The ability to tailor services to specific user needs, ease of access, and periodic payment schedules makes these services much more attractive to users than existing business models. Businesses responding to this change and offering flexible subscription models have seen immense growth in recent years. True to Indxx’s nature, we’ve been able to create an index that is unique and truly reflective of the space.”
Vaibhav Agarwal, Chief Revenue Officer at Indxx, added, “By virtue of having companies that derive a significant share of their revenues from a subscription-based model, spanning a range of product and service industries, the index provides a balanced and accurate representation of the theme. Our unparalleled research process combined with pertinent selection rules has translated into an index that has performed considerably well through its backtested history, thereby furthering our belief in this concept.”
Indxx has had a busy year with several launches in recent months including a mainstream global benchmark series, a suite of risk-managed equity indices, and three other thematic index plays covering ‘basic needs’, ‘flexible workplace’, and ‘fallen knives’ investment strategies.