S&P 500 Low Volatility Target Beta launches, gains interest in Asia

By Wendy Van Sickle

Columbus, Ohio, March 22 – S&P Dow Jones Indices launched the S&P 500 Low Volatility Target Beta index designed to track the S&P 500 Low Volatility index but maintain the same level of market risk as the S&P 500 index, according to a Tuesday press release.

It uses a beta-driven weighting scheme and “includes a leverage factor that changes based on realized historical beta with the aim of bringing the beta of the index close to that of the S&P 500. At each monthly rebalancing, the weight for the S&P 500 Low Volatility index is set proportional to the inverse of its beta,” according to the release.

“The index measures the performance of low volatility stocks within the S&P 500, while maintaining the S&P 500’s level of overall market risk,” Vinit Srivastava, senior director of strategy indexes with S&P Dow Jones, said in the release.

The index has been licensed to Natixis for product development.

Nicolas Reille, Nataxis’ head of equity derivatives sales, Asia Pacific, said the new index is especially suited to Asian markets “where investors are looking for yield enhancement investments.”

“Indeed, those investments linked to S&P 500 can be systematically boosted by instead linking to the S&P 500 Low Volatility Target Beta index,” Reille said in the release. “As a consequence, we are seeing a lot of interest from distributors across Asia and expect the trend to continue, with the S&P 500 Low Volatility Target Beta index increasingly adopted across established yield-focused products, including in the autocallable market.”

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