Overview
Announcements

Methodology Change | RAFI Indices | Effective Date 2021-02-10

Today, on the 3rd of February, Solactive announces the following changes to the methodology of the following Indices (the ‘Affected Indices’):

NAME

 RIC ISIN

RAFI Diversity & Governance Developed Index GTR

.RADGDEVT

DE000SLA62J5

RAFI Diversity & Governance Developed Index NTR

.RADGDEVN

DE000SLA62H9

RAFI Diversity & Governance Developed Index PR

.RADGDEVP

DE000SLA62G1

RAFI Diversity & Governance Europe Index GTR

.RADGEURT

DE000SLA62M9

RAFI Diversity & Governance Europe Index NTR

.RADGEURN

DE000SLA62L1

RAFI Diversity & Governance Europe Index PR

.RADGEURP

DE000SLA62K3

RAFI Diversity & Governance US Index GTR

.RADGUST

DE000SLA62F3

RAFI Diversity & Governance US Index NTR

.RADGUSN

DE000SLA62E6

RAFI Diversity & Governance US Index PR

.RADGUSP

DE000SLA62D8

RAFI Dynamic Multi-Factor Developed ex US Americas GTR Index

.RADMXNAT

DE000SL0BWV2

RAFI Dynamic Multi-Factor Developed ex US Americas NTR Index

.RADMXNAN

DE000SL0BWW0

RAFI Dynamic Multi-Factor Developed ex US Americas PR Index

.RADMXNAP

DE000SL0BWU4

RAFI Dynamic Multi-Factor Developed ex US APAC GTR Index

.RADMXAPT

DE000SL0BW13

RAFI Dynamic Multi-Factor Developed ex US APAC NTR Index

.RADMXAPN

DE000SL0BW21

RAFI Dynamic Multi-Factor Developed ex US APAC PR Index

.RADMXAPP

DE000SL0BW05

RAFI Dynamic Multi-Factor Developed ex US Europe and Israel GTR Index

.RADMXEIT

DE000SL0BWY6

RAFI Dynamic Multi-Factor Developed ex US Europe and Israel NTR Index

.RADMXEIN

DE000SL0BWZ3

RAFI Dynamic Multi-Factor Developed ex US Europe and Israel PR Index

.RADMXEIP

DE000SL0BWX8

RAFI Dynamic Multi-Factor Developed ex-U.S. Index NTR

.RADMFXNT

DE000SLA2Z85

RAFI Dynamic Multi-Factor Developed ex-U.S. Index PR

.RADMFXUP

DE000SLA2ZQ2

RAFI Dynamic Multi-Factor Developed ex-U.S. Index TR

.RADMFXUT

DE000SLA20S4

RAFI Dynamic Multi-Factor Developed Index NTR

.RADMFDLN

DE000SLA3G61

RAFI Dynamic Multi-Factor Developed Index PR

.RADMFDLP

DE000SLA3GS6

RAFI Dynamic Multi-Factor Developed Index TR

.RADMFDLT

DE000SLA3HM7

RAFI Dynamic Multi-Factor Emerging Markets Americas GTR Index

.RADMELAT

DE000SL0BW47

RAFI Dynamic Multi-Factor Emerging Markets Americas NTR Index

.RADMELAN

DE000SL0BW54

RAFI Dynamic Multi-Factor Emerging Markets Americas PR Index

.RADMELAP

DE000SL0BW39

RAFI Dynamic Multi-Factor Emerging Markets APAC GTR Index

.RADMEAPT

DE000SL0BXA4

RAFI Dynamic Multi-Factor Emerging Markets APAC NTR Index

.RADMEAPN

DE000SL0BXB2

RAFI Dynamic Multi-Factor Emerging Markets APAC PR Index

.RADMEAPP

DE000SL0BW96

RAFI Dynamic Multi-Factor Emerging Markets EMEA GTR Index

.RADMEEMT

DE000SL0BW70

RAFI Dynamic Multi-Factor Emerging Markets EMEA NTR Index

.RADMEEMN

DE000SL0BW88

RAFI Dynamic Multi-Factor Emerging Markets EMEA PR Index

.RADMEEMP

DE000SL0BW62

RAFI Dynamic Multi-Factor Emerging Markets Index NTR

.RADMFENT

DE000SLA2Z93

RAFI Dynamic Multi-Factor Emerging Markets Index PR

.RADMFEMP

DE000SLA2ZR0

RAFI Dynamic Multi-Factor Emerging Markets Index TR

.RADMFEMT

DE000SLA20T2

RAFI Dynamic Multi-Factor Europe GTR

.RADMFEUT

DE000SLA5VH3

RAFI Dynamic Multi-Factor Europe NTR

.RADMFEUN

DE000SLA5VG5

RAFI Dynamic Multi-Factor Europe PR

.RADMFEUP

DE000SLA5VE0

RAFI Dynamic Multi-Factor Global Index NTR

.RADMFGLN

DE000SLA3G53

RAFI Dynamic Multi-Factor Global Index PR

.RADMFGLP

DE000SLA3GR8

RAFI Dynamic Multi-Factor Global Index TR

.RADMFGLT

DE000SLA3HL9

RAFI Dynamic Multi-Factor U.S. Index NTR

.RADMFUNT

DE000SLA2Z77

RAFI Dynamic Multi-Factor U.S. Index PR

.RADMFUSP

DE000SLA2ZP4

RAFI Dynamic Multi-Factor U.S. Index TR

.RADMFUST

DE000SLA20R6

RAFI ESG Developed Index GTR

.RAESGDVT

DE000SLA5NN8

RAFI ESG Developed Index NTR

.RAESGDVN

DE000SLA5NM0

RAFI ESG Developed Index NTR (EUR)

.RAESGDNE

DE000SLA8J06

RAFI ESG Developed Index PR

.RAESGDVP

DE000SLA5NL2

RAFI ESG Developed PR (EUR)

.RAESGDPE

DE000SL0AK75

RAFI ESG Europe Index GTR

.RAESGEUT

DE000SLA5NV1

RAFI ESG Europe Index NTR

.RAESGEUN

DE000SLA5NU3

RAFI ESG Europe Index PR

.RAESGEUP

DE000SLA5NT5

RAFI ESG US Index GTR

.RAESGUST

DE000SLA5NS7

RAFI ESG US Index NTR

.RAESGUSN

DE000SLA5NQ1

RAFI ESG US Index PR

.RAESGUSP

DE000SLA5NP3

RAFI Fundamental Australia 200 Index GTR

.RAFIAULT

DE000SLA5VY8

RAFI Fundamental Australia 200 Index NTR

.RAFIAULN

DE000SLA5VZ5

RAFI Fundamental Australia 200 Index PR

.RAFIAULP

DE000SLA5VX0

RAFI Fundamental Australia Small Company Index GTR

.RAFIAUST

DE000SLA5VV4

RAFI Fundamental Australia Small Company Index NTR

.RAFIAUSN

DE000SLA5VW2

RAFI Fundamental Australia Small Company Index PR

.RAFIAUSP

DE000SLA5VU6

RAFI Fundamental Developed Asia Pacific Index (NTR)

.RAFIDAPN

DE000SLA65B5

RAFI Fundamental Developed Asia Pacific Index (PR)

.RAFIDAPP

DE000SLA65A7

RAFI Fundamental Developed Asia Pacific Index (TR)

.RAFIDAPT

DE000SLA65C3

RAFI Fundamental Developed EUR Index NTR

.RAFIDVEN

DE000SL0BXM9

RAFI Fundamental Developed EUR Index PR

.RAFIDVEP

DE000SL0BXL1

RAFI Fundamental Developed ex-US Index NTR

.RAFIDXUN

DE000SLA3H94

RAFI Fundamental Developed ex-US Index PR

.RAFIDXUP

DE000SLA3H11

RAFI Fundamental Developed ex-US Index TR

.RAFIDXUT

DE000SLA3JH3

RAFI Fundamental Developed Index NTR

.RAFIDEVN

DE000SLA3H86

RAFI Fundamental Developed Index PR

.RAFIDEVP

DE000SLA3H03

RAFI Fundamental Developed Index TR

.RAFIDEVT

DE000SLA3JG5

RAFI Fundamental Emerging Markets Index NTR

.RAFIEMN

DE000SLA3JB6

RAFI Fundamental Emerging Markets Index PR

.RAFIEMP

DE000SLA3H37

RAFI Fundamental Emerging Markets Index TR

.RAFIEMT

DE000SLA3JK7

RAFI Fundamental Europe Index NTR

.RAFIEURN

DE000SLA3JA8

RAFI Fundamental Europe Index NTR (USD)

.RAFIEUNU

DE000SLA7091

RAFI Fundamental Europe Index PR

.RAFIEURP

DE000SLA3H29

RAFI Fundamental Europe Index PR (USD) (INTERNAL)

.RAFIEUPU

RAFIEUPU0000

RAFI Fundamental Europe Index TR

.RAFIEURT

DE000SLA3JJ9

RAFI Fundamental Europe Index TR (USD) (INTERNAL)

.RAFIEUTU

RAFIEUTU0000

RAFI Fundamental Global All Company Index GTR

.RAFIGAT

DUMMYISIN129

RAFI Fundamental Global All Company Index NTR

.RAFIGAN

DUMMYISIN128

RAFI Fundamental Global All Company Index PR

.RAFIGAP

DUMMYISIN127

RAFI Fundamental Global Index NTR

.RAFIGLBN

DE000SLA3H78

RAFI Fundamental Global Index PR

.RAFIGLBP

DE000SLA3HZ9

RAFI Fundamental Global Index TR

.RAFIGLBT

DE000SLA3JF7

RAFI Fundamental U.K. All Company Index NTR

.RAFIUKAN

DE000SLA3JE0

RAFI Fundamental U.K. All Company Index PR

.RAFIUKAP

DE000SLA3H60

RAFI Fundamental U.K. All Company Index TR

.RAFIUKAT

DE000SLA3JN1

RAFI Fundamental U.S. Index NTR

.RAFIUSN

DE000SLA3JC4

RAFI Fundamental U.S. Index PR

.RAFIUSP

DE000SLA3H45

RAFI Fundamental U.S. Index TR

.RAFIUST

DE000SLA3JL5

RAFI Fundamental U.S. Small Company Index NTR

.RAFIUSSN

DE000SLA3JD2

RAFI Fundamental U.S. Small Company Index PR

.RAFIUSSP

DE000SLA3H52

RAFI Fundamental U.S. Small Company Index TR

.RAFIUSST

DE000SLA3JM3

RAFI Low Volatility Factor Developed Index NTR

.RADMFLDN

DE000SLA3HG9

RAFI Low Volatility Factor Developed Index PR

.RADMFDLV

DE000SLA3G12

RAFI Low Volatility Factor Developed Index TR

.RADMFLDT

DE000SLA3HV8

RAFI Low Volatility Factor U.S. Index NTR

.RADMFULN

DE000SLA20B0

RAFI Low Volatility Factor U.S. Index PR

.RADMFULV

DE000SLA2ZT6

RAFI Low Volatility Factor U.S. Index TR

.RADMFULT

DE000SLA20V8

RAFI Multi-Factor Climate Transition Developed GTR Index

.RAMFCTDT

DE000SL0BWK5

RAFI Multi-Factor Climate Transition Developed NTR Index

.RAMFCTDN

DE000SL0BWJ7

RAFI Multi-Factor Climate Transition Developed PR Index

.RAMFCTDP

DE000SL0BWH1

RAFI Multi-Factor Developed EUR Index NTR

.RAMDNEUR

DE000SLA98K7

RAFI Multi-Factor Developed EUR Index PR

.RAMDPEUR

DE000SL0AK67

RAFI Multi-Factor Developed ex Low Volatility GTR

.RAMDXLVT

DE000SLA7125

RAFI Multi-Factor Developed ex Low Volatility NTR

.RAMDXLVN

DE000SLA7117

RAFI Multi-Factor Developed ex Low Volatility PR

.RAMDXLVP

DE000SLA7109

RAFI Multi-Factor Developed ex-U.S Index NTR

.RAQMFXNT

DE000SLA21D4

RAFI Multi-Factor Developed ex-U.S Index PR

.RAQMFXUP

DE000SLA21C6

RAFI Multi-Factor Developed ex-U.S Index TR

.RAQMFXUT

DE000SLA21E2

RAFI Multi-Factor Developed Index NTR

.RAQMFDLN

DE000SLA3G87

RAFI Multi-Factor Developed Index NTR (GBP)

.RAMDNGBP

DE000SLA5JY3

RAFI Multi-Factor Developed Index PR

.RAQMFDLP

DE000SLA3GV0

RAFI Multi-Factor Developed Index TR

.RAQMFDLT

DE000SLA3HP0

RAFI Multi-Factor Emerging Markets Index NTR

.RAQMFENT

DE000SLA21G7

RAFI Multi-Factor Emerging Markets Index PR

.RAQMFEMP

DE000SLA21F9

RAFI Multi-Factor Emerging Markets Index TR

.RAQMFEMT

DE000SLA21H5

RAFI Multi-Factor ex-Momentum Emerging Markets GTR Index

.RAMFEXMT

DE000SLA3VX5

RAFI Multi-Factor ex-Momentum Emerging Markets NTR Index

.RAMFEXMN

DE000SLA3VY3

RAFI Multi-Factor ex-Momentum Emerging Markets PR Index

.RAMFEXMP

DE000SLA3VW7

RAFI Multi-Factor Global ex-Switzerland GTR

.RAMFGXST

DE000SLA4106

RAFI Multi-Factor Global ex-Switzerland NTR

.RAMFGXSN

DE000SLA4114

RAFI Multi-Factor Global ex-Switzerland PR

.RAMFGXSP

DE000SLA41Z5

RAFI Multi-Factor Global Index NTR

.RAQMFGLN

DE000SLA3G79

RAFI Multi-Factor Global Index NTR (AUD)

.RAMGNAUD

DE000SLA4387

RAFI Multi-Factor Global Index PR

.RAQMFGLP

DE000SLA3GU2

RAFI Multi-Factor Global Index TR

.RAQMFGLT

DE000SLA3HN5

RAFI Multi-Factor U.S. Index NTR

.RAQMFUNT

DE000SLA21K9

RAFI Multi-Factor U.S. Index PR

.RAQMFUSP

DE000SLA21J1

RAFI Multi-Factor U.S. Index TR

.RAQMFUST

DE000SLA21L7

RAFI Multi-Factor Value Focus ex Quality Developed NTR Index

.RMFVXQDN

DE000SL0AZ60

RAFI Multi-Factor Value Focus ex Quality Developed PR Index

.RMFVXQDP

DE000SL0AZ52

RAFI Multi-Factor Value Focus ex Quality Developed TR Index

.RMFVXQDT

DE000SL0AZ78

RAFI Size Factor Developed Index NTR

.RADMFDSN

DE000SLA3HJ3

RAFI Size Factor Developed Index PR

.RADMFDS

DE000SLA3G38

RAFI Size Factor Developed Index TR

.RADMFDST

DE000SLA3HX4

RAFI Value Factor Developed Eurozone Fossil Fuels Capped GTR

.RAVEFFCT

DE000SLA7158

RAFI Value Factor Developed Eurozone Fossil Fuels Capped NTR

.RAVEFFCN

DE000SLA7141

RAFI Value Factor Developed Eurozone Fossil Fuels Capped PR

.RAVEFFCP

DE000SLA7133

RAFI Value Factor Developed ex-U.S. Index NTR

.RADMFXUN

DE000SLA20F1

RAFI Value Factor Developed ex-U.S. Index PR

.RADMFXUV

DE000SLA2ZX8

RAFI Value Factor Developed ex-U.S. Index TR

.RADMFXVT

DE000SLA20Z9

RAFI Value Factor U.S. Index NTR

.RADMFUVN

DE000SLA20A2

RAFI Value Factor U.S. Index PR

.RADMFUV

DE000SLA2ZS8

RAFI Value Factor U.S. Index TR

.RADMFUVT

DE000SLA20U0

 

 

Rationale for Methodology Change

Solactive has determined to change the calculation method of cash flow and book value so that the index target of the Affected Indices can be better pursued.

The increase in intangible assets over the past 30 years has prompted Solactive to include intangible assets in the calculation of the book value and operating cash flow.

For the market in general, book value misses roughly half of the average company’s capital today. For the average value company, book value misses more than 1/3 of the company’s total capital which is represented by intangibles. For the average growth company, book value misses nearly 2/3 of the company’s total capital which is represented by intangibles. Improving the ratios by intangibles reflects the book values more accurate i.e. the weight of the stock in the index composition will be more accurate.

Moving the rebalancing from the last business day of every 3rd Month of each quarter to the 3rd Friday of every 3rd Month of each quarter would provide greater liquidity during the rebalancing process. The 3rd Friday of every 3rd Month of each quarter, referred to as “triple witching day”, generally has much higher volume/liquidity than month ends due to the simultaneous expiration of Stock Options, Stock Index Futures, Stock Index Options. The selection day will also move from last business day of February, May, August, and November to 2nd Friday of February, May, August, and November to ensure there is enough time to perform the needed research and checks.

For the RAFI Multi-Factor Emerging Markets Index and RAFI Multi-Factor ex-Momentum Emerging Markets Index, that include a size factor, there is a minimum basis point weight of 0.02% due to the large number of securities in size factor with small weights. For indices without a size factor this minimum threshold is not a factor given that the other four factors, (value, low volatility, quality and momentum) are constructed from the large mid universe. Solactive has decided to increase the threshold to 0.01% as a result. There are only a handful of securities that are below that threshold in these indices and have an immaterial impact on the overall index.

The definition currently used for the “business day” is incorrect, so the change is necessary to be done.

Furthermore, the selection of the starting universe has been changed. The selection will occur within country instead of region.

 

Changes to the Index Guideline

The following Methodology Changes will be implemented in the following points of the Index Guideline (ordered in accordance with the numbering of the affected sections):

 

Section 2.4: Fundamental Weights

From (old version):

“2.4 Fundamental Weights

Fundamental weights are calculated using four accounting measures from company financial statements:

  1. Adjusted sales are calculated as company sales averaged over the past five years multiplied by the ratio of average equity to average assets.
  2. Cash flow is the company operating cash flow averaged over the past five years.
  3. Dividend plus buybacks are calculated using the average dividends paid and share buybacks over the past five years.
  4. Book value is the most recent company book value. […]”

To (new version):

„2.4 Fundamental Weights

Fundamental weights are calculated using four accounting measures from company financial statements:

  1. Adjusted sales is calculated as company sales multiplied by company equity to assets ratio averaged over the past five years.
  2. Cash flow is calculated as company operating cash flow averaged over the past five years plus company R&D expenses averaged over the past five years.
  3. Dividend plus buybacks are calculated using the average dividends paid and share buybacks over the past five years.
  4. Book value plus intangibles is calculated as the most recent company book value plus research capital, with research capital defined as the accumulation of depreciated R&D expenses over the past 6 years. […]”

 

Section 2.8: Rebalance

From (old version):

„[…]

End of March, June, September

[…]”

To (new version):

„[…]

3rd Friday in March, June, September

[…]”

 

Section 4: Definitions

From (old version):

“Selection Day” is the last business day of February, May, August, and November where the Index Sponsor provides the new constituents and weights of the Index (see Section 2, Construction Methodology).”

To (new version):

“Selection Day” is the 2nd Friday of February, May, August, and November where the Index Sponsor provides the new constituents and weights of the Index (see Section 2, Construction Methodology).”

 

Section 2. RAFI Multi-Factor Index Construction

Added:

„[…]

For indices that do not include the size factor, the minimum stock weight is 0.01%.

[…]”

 

Section 2.10.1    RAFI Multi-Factor ex-Momentum Emerging Markets Index Construction

From (old version):

„[…]

The minimum stock weight is 0.002%

[…]”

To (new version):

„[…]

The minimum stock weight is 0.01%

[…]”

 

Section 2. RAFI Dynamic Multi-Factor Index Construction

Added:

„[…]

For indices that do not include the size factor, the minimum stock weight is 0.01%.

[…]”

 

Section 4: Definition of the “Business Day”

From (old version):

„A “Business Day” is a day on which the US market or UK market is open for trading (see Appendix 5.1 for relevant indices).“

To (new version):

„A “Business Day” is defined as Monday through Friday, including holidays.“

 

Defined terms used in this announcement, but not defined herein, have the meaning assigned to them in the respective index guideline of the Affected Indices. The amended version of the index guideline will be available on the effective date.