As alternatively-weighted indices and the exchange traded funds that track those indices surge in popularity, more index providers are working to meet increased demand.
On Monday, S&P Dow Jones Indices unveiled two new factor-driven index offerings: S&P Low Beta indices and S&P Intrinsic Value Weighted indices.
Factor indices are strategy indices that seek to capture performance characteristics different from traditional cap-weighted benchmarks. SPDJI has been offering factor indices for years beginning with an equal weighted version of the S&P 500 in 2003, according to a statement issued by S&P Dow Jones Indices.
The new index families pull constituent companies from the S&P Global Broad Market Index (BMI). For example, the low beta index offerings are cap-weighted and contain 70% of the S&P Global BMI with the lowest beta, according to the statement.
Although U.S. stocks have raced to record highs, ETFs emphasizing low volatility and reduced beta remain popular with investors. Just this quarter, the PowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV) has pulled in $186.3 million in new assets.
Conservative, “low-beta” stocks, or sectors that exhibit low volatility and tend to be less influenced by broad market moves, are picking up steam this year. It suggests that investors are worried about earnings growth and the U.S. economy, especially after U.S. gross domestic product contracted in the first quarter, the first time in three years. [Low Vol ETFs Remain Popular With Investors
“The S&P Intrinsic Value Weighted index family measures the performance by a stock’s intrinsic value which is determined by its book value and the present value of its future earnings above its cost of capital (abnormal earnings),” according to the statement.
The statement did not say if the new S&P indices will be picked by ETF providers for use with new or existing funds.
ETF Trends editorial team contributed to this post.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.