Smart beta indices

Most products available in the UK retail market are linked to the performance of the FTSE 100, which is the most widely understood benchmark for equity performance in the UK. However, we also include products in our range that are linked to other indices, to allow investors to gain exposure to equity markets in an alternative way. These indices are often referred to as ‘custom indices’ or ‘smart beta indices’, meaning that they are have a rules-driven, factor-based approach in their methodology.This can have two advantages for investors:

  • To introduce some diversification into their portfolio, by gaining exposure to different regions, sectors and sizes of company
  • To provide the potential for improved structured product pricing and terms

Please see the links below for some additional resources on the smart beta indices that we can use in our range of structured products.

FTSE 100 FDEW  

The FTSE 100 Fixed Dividend Equal Weight Custom Index (‘FTSE 100 FDEW’) is a custom index, developed by FTSE Russell. It measures the performance of the same 100 largest companies on the London Stock Exchange that make up the FTSE 100. However, as its name suggests, the FTSE 100 FDEW is different to the FTSE 1o0 in two important ways:

  • Firstly, the 100 shares in the index are all equally weighted, at 1% by FTSE Russell, instead of being weighted according to their market capitalisation.
  • Secondly, the index is based on a total return index. This mens that all of the dividends paid by the companies are included in the index. However, a fixed dividend of 50 points id deducted each year.