Solactive launches three new thematic indices

Jun 17th, 2020 | By | Category: ETF and Index News

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Frankfurt-based index provider Solactive has launched three new thematic indices that capture investment opportunities related to artificial intelligence, national defense, and senior citizens.

The indices capture investment opportunities related to artificial intelligence, national defense, and senior citizens.

The indices capture investment opportunities related to artificial intelligence, national defense, and senior citizens.

The indices will replace existing index strategies, originally created by online broker Motif Capital Management, for which Solactive acted as an independent calculation agent.

These Motif indices were used to underlie structured products offered by Goldman Sachs Asset Management.

Motif announced in April, however, that it had become insolvent due to the economic impact of Covid-19, raising questions about the future of investment products that were linked to the firm’s indices, including a suite of Goldman Sachs ETFs.

While Solactive has created the new indices to replace Motif’s offering, it has also updated the methodology according to its own framework. Notably, Solactive is using its proprietary Natural Language Processing engine called ARTIS (Algorithmic Theme Identification System) to drive security selection.

The indices

The Solactive Artificial Intelligence Index consists of companies benefitting from the growing adoption of artificial intelligence business solutions, the Solactive National Defense Index comprises companies that stand to benefit from defense-related expenditure by the US or foreign governments, and the Solactive Aging of America Index includes healthcare and real estate companies providing therapies and services primarily for senior citizens.

Each index selects its constituents from a universe of US-listed equities with market capitalizations greater than $500 million and average daily trading values above $1m.

The methodology uses ARTIS to provide each potential constituent with a 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, scanning, for example, for how frequently certain keywords related to the chosen theme are used.

The indices will use ARTIS, combined with business classification screens and the oversight of an index committee, to select firms with sufficient relevance to the underlying theme. Constituents are weighted using a combination of market capitalization and thematic relevance score.

Solactive has also introduced risk-managed versions of these indices which shift part of their exposure into an ultra-short Treasury bond ETF if realized volatility exceeds a certain cap at rebalance.

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