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iSTOXX® MUTB Smart Beta Indices
With that in mind, STOXX developed, in collaboration with Mitsubishi UFJ Trust and Banking Corp. (MUTB), the leading Japanese trust bank, the suite of iSTOXX MUTB Smart Beta Indices. These strictly transparent and rules-based indices currently offer exposure to Value, Quality Momentum, three main sources of systematic risk and potential return. In addition, Quality Dividend and Minimum Variance indices are available. The iSTOXX MUTB Smart Beta index families are available for a range of regions with a focus on Global and Japan universes.
Value factor Value investing is premised on identifying stocks that trade for less than their intrinsic value based on cash flow and earnings per share. Value is seen as a pro-cyclical factor, meaning value companies have traditionally benefitted during periods of economic expansion.
The iSTOXX® MUTB Value Indices select companies based on a normalized value factor that collects from not one, but three ratios: book-to-price, earnings-to-price and cash flow from operations-to-price. This approach brings diversification to the overall portfolio of selected stocks, and tends to lead to higher returns over time compared to both the broader market and value approaches based on single ratios. In addition, to avoid what is called the ‘value trap’, this strategy employs quality screens to reduce downside risk. The indices are available based on STOXX’s Global, Global ex-Japan and Japan universes.
Quality factor Quality investing focuses on stocks with a solid financial background based on debt coverage, earnings and other metrics. It is considered a “defensive” factor, based on the notion that investors tend to be drawn to these companies during periods of economic contraction.
The iSTOXX® MUTB Quality Indices reflect this, aiming to capture the performance of quality companies with high profitability, low leverage and sustainable cash flows. The indices are available for different STOXX universes, covering Global, Global ex-Japan, Asia/Pacific, Japan, and China A-shares.
The suite is complemented by indices that focus on specific aspects of quality companies, such as the iSTOXX® MUTB Japan Proactive Leaders 200 Index.
Momentum factor Momentum investing focuses on stocks with exceptional historical price movements. It is based on the theory that stocks that have performed well will likely continue to outperform, which is also backed by academic research as well as empirical data.
The iSTOXX® MUTB Momentum Indices allow investors to access this strategy by capturing the performance of companies with strong historical price movements. Components are selected according to a momentum factor score which is calculated based on a stock‘s price movements over the past 12 months and adjusted to account for market beta, size and book-to-price biases. The indices are available based on STOXX’s Global, Global ex-Japan and Japan universes.
Quality Dividend Indices Investing in dividend strategies will continue to be important as investors look for yield in a low-yield environment. Sustainable dividend yield is especially critical for long-term investments, such as retirement planning.
The iSTOXX® MUTB Quality Dividend Indices follow a strategy focused on mitigating dividend reduction risk by combining a fundamentals-based quality factor with a volatility measure. The indices focus on companies’ historical returns, stock-price volatility, financial health, and income stability. They thus succeed in filtering out companies that do not continuously deliver high dividends, resulting in a sound strategy that provides good quality, high-dividend investments.
The iSTOXX MUTB Quality Dividend Indices are available for different STOXX universes, covering Global, Global ex-Japan, Asia/Pacific and Japan.
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