Providing access to intuitive and easy-to-grasp investment concepts…..
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Timo Pfeiffer, Head of Research at Solactive
The new Solactive Intuitive Beta™ Indices constructed around intuitive themes such as workforce efficiency, corporate longevity and value investing are being rolled out. The Solactive Intuitive Beta™ is an innovative investment approach constituting the bedrock of a series of smart beta indices in which intuition, or gut feeling, takes a prominent role in defining the passive investment strategy.
Timo Pfeiffer, Head of Research at Solactive, commented: “With Intuitive Beta™ we are building a whole range of investment strategies targeted at index-linked products, such as ETFs and structured products, in which we go beyond purely quantitative screens. Providers are also seeking a storyline behind the strategies they deploy in their products. With this in mind, Intuitive Beta™ promotes an approach based on intuitive and straightforward stories that should of course also translate into performance.”
The first Intuitive Beta™ member is the Solactive Workforce Efficiency US Large Cap Index. The idea of creating a concept around workforce efficiency was incepted when thinking about what resources make a company outstanding. One of these is certainly its employees as human capital. After all, who wants to invest in companies with unproductive employees? Workforce efficiency is especially important in labor-intensive industries where the success of the firm mainly depends on its workforce, as opposed to capital-intensive industries where performance is more dependent on factors such as property, plant & equipment.
The second Intuitive Beta™ newcomer is the Solactive P/E Ratio US Large Cap Index, an index made up of undervalued US companies, as measured by the P/E ratio. When buying equity, investors need to assess whether a stock is fairly priced relative to its earnings. Since undervalued stocks have historically tended to outperform those with high P/E ratios, the index targets stocks with the lowest P/E among US large caps. Over the period 2004-2017, the index has demonstrated an annualized return of about 10.2% compared to about 8.1% of the benchmark, thus demonstrating that this intuitive investment idea can be built into an index that generates outperformance.
Last but not least, what is the average age of the 100 oldest companies in the US? The Solactive US Established Companies Index deals exactly with this question by selecting the 100 oldest companies among US large caps. By investing in a basket of “time-proof” companies, where companies are on average 159 years old, investors can gain exposure to companies that have demonstrated resilience over time through repeated business cycles. Examples of constituents are Du Pont founded in 1802, Goldman Sachs in 1869 and Pfizer in 1849.
The Solactive Workforce Efficiency US Large Cap Index, the Solactive P/E Ratio US Large Cap Index and the Solactive US Established Companies Index are equally weighted and are each composed of 100 stocks chosen among US companies. The indices can be customised as per needs.