The UBS IQ Research Preferred Dividend Index (DIV) is based on the research of UBS’s investment bank and provides exposure to around 40 Australian equity securities.
Stephen Small, UBS Global Asset Management’s ETF capabilities manager, Australia, told InvestorDaily the fund is useful for investors looking to generate income from an equity portfolio and to diversify assets.
Mr Small said the substantial research UBS has conducted in constructing the portfolio means it is likely to generate better outcomes when compared with traditional market cap indices like the ASX 200.
“There is a significant amount of research gone into the underlying index. It’s based on the market research of our investment bank, and what they’ve done is basically design a portfolio that delivers 40 good strong securities that currently pay good dividends and franking credits,” said Mr Small.
According to UBS, the index uses a “modified free float weighting methodology” to ensure a more even allocation across large, mid and small cap securities compared to a conventional market-capitalised weighted index.
The index will be rebalanced quarterly and hold a 15 per cent turnover cap to minimise transaction costs.
This latest ETF follows the launch of UBS Global Asset Management’s first ETF 12 months ago, the UBS IQ Research Preferred Australian Share Fund, which has now raised close to $200 million.
Bryce Doherty of UBS Global Asset Management, Australasia, said UBS investment research has indicated defensive strategies such as sustainable income equity portfolios are likely to outperform in the next 15 years as the Baby Boomer generation retires.
“We therefore expect strong interest in DIV, our sustainable income ETF,” he said.
