Solactive, B-BRE and IBI partner on Israeli equity smart beta index and ETF

May 24th, 2017 | By | Category: Equities

Boutique index provider Solactive and B-BRE have launched the Solactive – B-BRE Tel Aviv 125 Low Volatility High Dividends Index, an index tracking the performance of a subset of 25 shares, selected for their high dividend and low volatility characteristics, from the TA-125 Index. The TA-125 is the most widely used market capitalisation benchmark index of the Tel Aviv stock exchange.

Solactive and B-BRE launch Israeli equity smart beta index

The index would have returned 37% in the past year with volatility of 11% and a dividend yield of 4.9%.

The index is the underlying reference index for a new ETF launched by Tel Aviv-based asset manager IBI Investment House.

Steffen Scheuble, CEO of Solactive, commented: “We are pleased to launch with B-BRE an Israel-themed index that puts together two of the most demanded smart beta factors today, low-volatility and high-dividend-yield. In this way, the Solactive – B-BRE Tel Aviv 125 Low Volatility High Dividends Index provides a strategic beta version of the broad-based TA-125 Index accessible to investors through the IBI Fund.”

The first step of the index methodology is to apply a filter to the TA-125 to select the 50 companies with the highest 12-month trailing dividend yield. From this group, the 25 stocks with the lowest 12-month trailing volatility are then chosen as the final index components.

This index is calculated as a total return index and denominated in Israeli Shekel (ILS). Components are weighted according to inverse volatility, subject to a sector cap of 35%. The three largest index components are Paz Oil Company, Matrix IT and First International Bank of Israel.

The current dividend yield of the index is 4.9% compared to around 1.7% for the underlying TA-125 index (data correct as of 20 May). For comparison, the PowerShares S&P 500 High Dividend Low Volatility UCITS ETF (LON: HDLG), which has a similar objective but for US large-cap stocks, has a dividend yield of 3.1% over the 12-months to 30 April.

The Solactive – B-BRE Tel Aviv 125 Low Volatility High Dividends Index would have returned 39% in the year to 20 May with a standard deviation of 11%. HDLG has returned 12% with a standard deviation of 10% over the same time period.

Shai Sasportas, head of ETF sector at IBI, added: “Following upon the success of our funds tracking the Solactive-B-BRE indices on the Israeli CRE market and the US REIT sector, we are pleased to extend the range of our smart-beta funds with a third index, with the launch of the first low-volatility high-dividends fund of large-cap Israeli stocks.”

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