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

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.