A new series of smart beta indices was launched Monday by London-based index provider FTSE Russell and Newport Beach, Calif.-based asset manager Research Affiliates Research Affiliates LLC.
The FTSE RAFI Equity Income Index Series, which will track high dividend-paying stocks that are screened to target sustainable income, aims to meet investor demand for dividend-focused indexing strategies, the two organizations say.
“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. To address this gap in the market, Research Affiliates and FTSE are introducing these new smart beta indices,” said Jason Hsu, co-founder and vice chairman of Research Affiliates, in a news release.
“The FTSE RAFI Equity Income Index Series includes high dividends from companies that have been screened for their ability to sustain their dividends,” Hsu said.
Investible products linked to indices developed by FTSE Russell and Research Affiliates had approximately US$75 billion of assets under manager (AUM) as of Mar 31, the two groups report.
The new index series was developed in co-operation with European exchange-traded fund (ETF) issuer, Source, which will be the first ETF issuer to license the new indices, the companies report.
Source plans to launch a family of ETFs based on the series later this year, noting that it contributed to the development of the indexes in response to demand from investors seeking a better-structured dividend-focused strategy.
“We have seen the increasing appetite for smart beta ETFs, and particularly for dividend-focused strategies like these, and look forward to working with Research Affiliates and FTSE to meet the investor need for this kind of exposure,” said Peter Thompson, president of Source.