Indxis UK dividend index to underlie ETFs

Index services group Indxis is looking to license its UK Dividend Achievers index to ETF sponsors, as well as investment banks and managers.

Indxis sales director Alan Price says the firm has been talking to a number of sponsors interested in launching products tied to its UK benchmark, but warns that it takes a long time for providers to develop ETFs.

The Indxis UK Dividend Achievers index, launched last year, is comprised of 102 of the most consistent dividend yielding stocks in the UK. Indxis says it returned 20.85% in the twelve months to the end of January, outperforming the MSCI UK by 2.96%

The company claims an investor who had put £10,000 in a UK Dividend Achievers ETF would have seen an absolute return of just over £2,000.

The UK index is the latest addition to the Mergent Dividend Achievers family of North American indices, which currently has $9bn assets under management. Price says the company currently has between 10 and 20 ETFs tracking its benchmarks, and is now looking to expand this offering into Europe.

He adds: "There are only about 20 dividend funds in Europe, and to my knowledge just one of those is based in the UK - the iShares FTSE UK Dividend Plus - so there is a lot space for growth.

"There is an appetite for these types of ETFs, it is just a case of introducing the right product through the right sponsor."

Indxis compiles its indices by identifying companies with a proven track record of consistent earnings growth and strong cash reserves, and says it can provide a regular and reliable income stream for low-risk portfolio strategies.

Price argues that the firm's method lends its UK index nicely to ETFs, with a relatively slow turnover rate of around 24% leading to low underlying costs and a quantitative decision process aiding transparency. He also contrasts the UK Dividend Achievers index with those currently on offer in the UK, which are generally custom FTSE indices.

With investors increasingly targeting international opportunities, Price says Indxis is looking at taking its ‘Dividend Achievers' methodology to other countries, and hints this may include emerging markets.