Solactive launches Deep Value index family

Jun 6th, 2017 | By | Category: ETF and Index News

German index provider Solactive has launched a new family of smart beta indices targeting returns attributable to the value factor. The Solactive Deep Value Index series comprises four indices focused on specific geographic regions.

Solactive launches value factor index family

The four indices in the series use a methodology that seeks out stocks with high levels of solvency, sustainable dividends and earnings, and attractive valuations.

The deep value screening methodology is based on a scoring system involving several fundamental metrics. The first layer of fundamental evaluation assesses a company’s ability to meet financial obligations based on leverage and interest cover for non-financials, and return on equity and EBITDA for financials. The second level of screening scores companies based on past earnings and dividends as an indication of future income and payout prospects.

Lastly, shares are evaluated on a number of price multiples, including cyclically adjusted price-earnings ratio (CAPE), CAPE/price-to-book and earnings yield, to estimate a company’s financial performance relative to its share price. Shares exhibiting low volatility and paying dividends are then chosen as final index constituents.

The Solactive European Deep Value Select 50 Index and the Solactive US Deep Value Select 50 Index are each composed of 50 stocks from Europe and the US respectively. Constituents within each index are equally weighted as of their rebalancing dates. The Solactive Atlantic Deep Value Select Index is comprised of a 70-30% split between the above two indices. The Solactive Deep Value World MV GTR Index is a global version of the index which also includes a minimum volatility weighting optimisation. Each index is rebalanced monthly.

The indices are comprised of highly liquid, investible securities, making them suitable as underlyings for investment products including exchange-traded funds. They have been licensed to BNP Paribas for future product development.

Steffen Scheuble, CEO of Solactive, commented: “The Solactive Deep Value Index family tilts exposure towards factors that can potentially be associated with premium returns. We are pleased that BNP Paribas is offering its clients this range of underlyings which can serve as the basis for index-linked products providing direct access to a fundamental screening approach.”

Stanislas Mesland, head of structured product underlyings, BNP Paribas, added: “As we experience various stages of the economic cycles, it is vital to perform in-depth fundamental analysis on investible companies. The Deep Value Index Family uses investment methodology designed to select sound investments even in challenging market situations. Following the success of the European version, BNP Paribas is pleased to offer clients a full range of Solactive Deep Value Indices across different geographies that serves as a great vehicle in meeting clients’ risk-return profiles.”

All the indices in the Solactive Deep Value Family are calculated as price return, net total return and gross total return.

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