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Solactive and B-BRE team up to launch Solactive – B-BRE Tel Aviv 125 Low Volatility High Dividends Index

Solactive and B-BRE are excited to announce the launch of the Solactive – B-BRE Tel Aviv 125 Low Volatility High Dividends Index, used as the underlying index for a new IBI fund trading on the Tel Aviv stock exchange.

The index mirrors the performance of 25 shares from the TA-125 index selected based on high dividend yield and low volatility features.

Specifically, a first filter is applied to the TA-125 preselecting the 50 companies with the highest 12-month trailing dividend yield.

Among these, the 25 with the lowest trailing 12-month volatility are then chosen as final index components of the Solactive – B-BRE Tel Aviv 125 Low Volatility High Dividends Index.

Israel has a strong economy, rated A1 Stable by Moody’s[1] and is home to a large number of companies with strong presence in sectors such as financial services, technology, real estate, healthcare and industrials. The country shows a positive economic outlook with growth forecasted at 3.41% in 2017 and 3.26% in 2018 against the OECD average of 1.98% and 2.29%, for the two years respectively[2]. Israel has also been strongly investing in innovation as proven by the rate of R&D expenditure to GDP, which is one of the highest among OECD members[3]. As such, the Solactive – B-BRE Tel Aviv 125 Low Volatility High Dividends Index allows investors to gain specific exposure to the Israeli economy through a basket of low volatility and high dividend-yield shares.

Steffen Scheuble, CEO of Solactive, commented: “We are pleased to launch with BBRE an Israel-themed index that puts together two of the most demanded smart beta factors today, precisely low-volatility and high-dividend-yield. In this way, the Solactive – B-BRE Tel Aviv 125 Low Volatility High Dividends Index provides a strategic beta version of the broad-based TA-125 Index accessible to investors through the IBI Fund.”

Daniel Baraz, Ph.D., Managing Partner at Bregman-Baraz Real Estate, said: “We think that the fund is an interesting investment instrument as it offers exposure to a strong and growing economy, through stocks that pay a high dividend yield. The current dividend yield of the fund is 4.9%, compared to an estimated 1.76% for TA-125. This also looks attractive in a global perspective: the PowerShares S&P 500 high dividends low-volatility index fund has a dividend yield of 3.86%. The underlying index’s performance is also impressive: in the last 12 months (as of 20/5) the total return of the index has been 38.6% with a standard deviation of 10.95%. The S&P 500 highdividends low-volatility fund had a total return of 10% with a standard deviation of 10.23%. This renders the risk-adjusted return of the index very impressive.”

Shai Sasportas, Head of ETF sector at IBI INVESTMENT HOUSE, added: “Following upon the success of our funds tracking the Solactive-B-BRE indices on the Israeli CRE market and the US REIT sector, we are pleased to extend the range of our smart-beta funds with a third index, with the launch of the first low-volatility high-dividends fund of large-cap Israeli stocks.”

The Solactive – B-BRE Tel Aviv 125 Low Volatility High Dividends Index is calculated as a gross total return index and is denominated in ILS.

Components are weighted according to inverse volatility, subject to an industry weight cap of 35%. The weighting mechanism also outweighs index components that have a history of being high dividend payers.

As of May 14 2017, more than 60% of the index was composed of companies operating in industries such as real estate development, oil refining & marketing, regional banks and information technology services. The three shares with the largest index weight according to inverse volatility are Paz Oil Company, Matrix IT and First International Bank of Israel.

Next Finance 30 May
Footnotes

[1] Moody’s Israel Government of Credit Rating

[2] OECD Data. Real GDP forecast

[3] OECD Data. Gross domestic spending on R&D

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