Overview

Intuitive BetaTM

“I rely far more on gut instinct than researching huge amounts of statistics”
(Richard Branson, founder of the Virgin Group)

Solactive unveils new investment approach: Intuitive BetaTM

Intuitive BetaTM is a family of smart beta indices that relies on a qualitative framework of intuitive screens. A simple, rules-based approach in which intuition, or gut feeling, takes a prominent role in defining the passive investment strategy. The aim is to offer exposure to a different field of smart beta that’s less data-driven and more focused on common sense. In this context, Solactive employs simple explanatory variables of performance such as corporate longevity to select and weight index components. Intuitive BetaTM embraces simplicity, intuition and transparency.

A few examples…

P/E ratio

The Solactive P/E Ratio US Large Cap Index is an Intuitive BetaTM 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.

Established companies

What’s the average age of the 100 oldest companies in the United States? The Solactive US Established Companies Index deals exactly with this question by selecting the 100 oldest US companies. By investing in a basket of “time-proof” companies, where the average company is 159 years old, investors can gain exposure to companies that have demonstrated resilience over time through repeated business cycles. Examples of companies in the index include Goldman Sachs (founded in 1869) and Pfizer (founded in 1849).

With Intuitive BetaTM, Solactive employs simple explanatory variables of performance as the basis for index strategies.