FTSE said its FTSE RAFI low volatility index series will assist investors with a rules-based methodology that selects low volatility stocks while “ensuring low turnover and large capacity”.
“Designed to provide a core-like equity exposure with lower volatility, the index series methodology employs a filter to avoid expensive low volatility stocks and is highly diversified across industry sectors and countries,” a statement from FTSE said.
“The indices can be used as performance benchmarks,” the statement said. “Published in real time, the new index series covers global, developed and emerging markets and can be segmented on a regional or single country basis.”
Research Affiliates co-founder and vice chairman Jason Hsu said the FTSE RAFI low volatility methodology represents an approach that filters all available low volatility stocks based on valuation.
“The low volatility anomaly is a significant and persistent phenomenon which offers investors the opportunity to re-profile risk-adjusted returns of their equity core,” Mr Hsu said.
“However, existing quant-active approaches and smart beta approaches have shortcomings and do not fully deliver on the category’s potential.”
FTSE managing director Kevin Bourne said the launch of this new suite of products aims to “satisfy market demand” for an index that captures low volatility stocks using “fundamental factors”.
