Solactive launches global infrastructure low earnings volatility index

May 10th, 2017 | By | Category: Alternatives / Multi-Asset

Solactive has unveiled the Solactive Global Infrastructure Low Earnings Volatility Index, a reference for the performance of a global portfolio of 100 companies operating in the infrastructure space that exhibit low volatility in reported earnings compared to their peers. The index has been licensed to European ETF provider Amundi to underlie the Amundi Global Infrastructure UCITS ETF (GINF) which launched today on Euronext’s Paris Exchange.

Solactive launches global infrastructure low earnings volatility index

Solactive rolls out global infrastructure index with additional earnings volatility mitigation.

The index tracks infrastructure companies from sectors such as telecommunications, transportation, logistics, utilities and energy. These firms may be associated with steadier revenues due to the long-term nature and inelastic demand for infrastructure projects compared to those in more cyclical sectors. The index puts further emphasis on enhancing this stability characteristic by focusing on reducing exposure to earnings volatility.

This is done by ranking all eligible securities according to the volatility of their earnings, calculated as the sample standard deviation of their earnings per share growth rate (using semi-annual data) over the past five years. The company with the lowest volatility receives the top ranking. The 100 stocks with the lowest volatility of earnings are selected as index components.

Index constituents are weighted according to free float market capitalisation and are subject to weight caps of 4% per component and 25% per sector. The index is denominated in euros.

The majority of the index’s country exposure is the US at 50.0%, while Canada (10.9%), Hong Kong (6.3%) and Germany (6.1%) also play significant roles. The five top holdings by weight are Canadian National Railway Company, NextEra Energy, Oracle Corporation, Union Pacific Corporation and CSX Corporation, each with an approximate 4% weighting. The composition is rebalanced semi-annually in April and October.

Using back-tested data to June 2011, the index has returned 13.2% per annum with a volatility of 12.3%.

Solactive Global Infrastructure Index Performance

Source: Solactive.

Solactive also notes the index’s performance may benefit from recently announced increases in infrastructure spending from governments of countries such as the US, Japan and Canada.

Steffen Scheuble, CEO at Solactive, commented: “There is currently a lot of demand for infrastructure-focused investing and the Solactive Global Infrastructure Low Earnings Volatility Index provides a cost-efficient way to gain access to this increasingly popular theme via the Amundi Global Infrastructure UCITS ETF. The index includes an additional tilt towards companies that show a relatively stable earnings trajectory.”

Matthieu Guignard, global head of product development and capital markets at Amundi, added: “We’re very proud to be listing today on Euronext Paris. This ETF adds a new brick to the Amundi ETF range on a theme that is gaining strong traction with investors. In line with Amundi’s commitment to provide cost-competitive investment solutions, this product is offered with the lowest price on the European market.”

GINF has a total expense ratio of 0.55%.

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