Global index provider FTSE Russell, along with Research Affiliates, has launched two new smart beta indices.
The FTSE RAFI Equity Income Index Series will track high-dividend paying stocks that are screened to target sustainable income, an FTSE Russell statement said.
The FTSE RAFI index series was developed in response to investors seeking a structured dividend-focused strategy, the statement said.
Research Affiliates co-founder and vice chairman Jason Hsu said: “For a good number of investors, accessing sustainable, high income remains an unmet need.”
“Yields in fixed income remain historically low, while within the equity space, existing high-dividend strategies tend to tilt toward low growth sectors or poor quality stocks.”
Mr Hsu said the FTSE RAFI Equity Income Index Series will address a gap in the market.
“The FTSE RAFI Equity Income Index Series includes high dividends from companies that have been screened for their ability to sustain their dividends,” he said.
European ETF issuer Source – who contributed to the development of the benchmarks – will be the first ETF provider to license the index series, with other ETFs linked to the index due to be launched in late 2015.
FTSE Russell managing director, sales and marketing, Caroline O’Shaughnessy said: “As our partnership with Research Affiliates reaches its 10th year, we are proud that our close collaboration continues to yield innovative benchmarks that respond to investor needs.”
“Source’s licensing of the FTSE RAFI Equity Income Index Series reflects this, as alternative benchmarks provide a critical, low-cost investment solution to a wide range of market participants.”
Source president Peter Thompson added: “We have seen increasing appetite for smart beta ETFs, and particularly for dividend-focused strategies like these.”
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