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Solactive launches European Quality Market Neutral Index

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Solactive has launched the Solactive European Quality Market Neutral Index, which has been licensed to Natixis as an underlying for structured products.

The Solactive European Quality Market Neutral Index is constructed by matching a long position in the Solactive European Quality Index with a short position in Euro Stoxx 50 Index Futures.
 
It combines a fundamental quality framework of rules-based stock picking with a market-neutral approach aimed at offsetting portfolio sensitivity to systematic risk. The purpose of the index is to allow investors to stabilise volatility while capturing outperformance of the selected stocks versus the market.
 
As such, the long position, coinciding with the Solactive European Quality Index, includes companies that have been selected based on three fundamental microeconomic criteria regarded as potential sources of future outperformance.
 
Firstly, companies are screened according to ROE, or the efficiency with which a company generates profit for its shareholders. Secondly, a financial leverage filter is applied, measured by the debt-to- assets ratio, as an indicator of financial model sustainability and resilience of financial performance at times of economic slowdown. Lastly, the dividend yield is taken into account, as another indicator of the financial health of a company.
 
In the face of pervasive market uncertainty and considering the difficulty in identifying consistently outperforming stocks, the short position in Euro Stoxx 50 Index Futures helps beta-hedge the aforementioned stock-picking strategy and can compensate for adverse market movements.
 
Henning Kahre (pictured), head of research at Solactive AG, says: “The Solactive European Quality Index was created with the idea of leveraging on the long-term potential of certain quality criteria to the benefit of future performance. The Solactive European Quality Market Neutral Index refines this index concept by adding a hedging strategy that can appeal to investors that want to avoid directional market exposure.”
 
Frederic Goasguen, head of index engineering, equity derivatives at Natixis’ Corporate & Investment Banking, says: “The launch of the Solactive European Quality Market Neutral Index, in collaboration with Solactive, is testament to Natixis’ commitment in offering innovative equity solutions to our clients by providing smart access to a dynamic basket of quality companies, which will prove beneficial during sustained periods of market sluggishness. The launch of this index adds to Natixis’ new generation of indices and will enable us to expand the range of investment solutions to both our retail and institutional clients.”
 
The Solactive European Quality Market Neutral Index is provided as Price Return denominated in EUR. The index is composed of 50 equally-weighted European stocks, with a minimum of one and a maximum of seven companies per sector included in the index.
 
The composition of the index is readjusted yearly and the short exposure to Euro Stoxx 50 Index Futures is determined on a monthly basis. The index is based on 100 at the close of trading on the start date of 8 January 2001. 

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