This year, STOXX introduced the Focus indices to address a growing disconnect between where companies are listed and where they generate economic exposure, providing investors with a new way to build geographic allocations based on revenue sources rather than domicile.
The premise of the indices is that, , amid heightened trade tensions and what many see as a trend towards deglobalization, a company’s country of domicile may matter less than where it generates its revenues. Traditional listing-based stock selection may expose investors to unseen risk and limit the effectiveness of diversification.
The Focus indices segment key regional benchmarks according to revenue exposure, creating Domestic Focus and Foreign Focus baskets across five major markets. Using FactSet GeoRev data, the Domestic Focus indices include companies that derive at least 50% of sales from the target market[1], while the Foreign Focus indices exclude them.
BlackRock’s iShares has launched ETFs tracking the STOXX® Europe 600 Domestic Focus, STOXX® Europe 600 Foreign Focus, STOXX® UK Domestic Foreign and STOXX® UK Foreign Focus indices.
A recent webinar hosted by IPE gave STOXX and iShares experts the opportunity to discuss the rationale behind the new indices and ETFs, explore their diversification potential and how they complement market-cap-weighted benchmarks, and analyze their performance, particularly around recent key macroeconomic events.
Vincent Denoiseux, Head of Product Research and Innovation, iShares EMEA, and Antonio Celeste, Head of Sustainability & Factors, Product Management, STOXX, participated in the discussion.
Denoiseux explained that the Focus indices offer sector, factor and market capitalization diversification comparable to that of their parent benchmarks, while providing a distinct tactical allocation based on macroeconomic drivers. At the same time, he noted that they can serve as a more accurate long-term strategic investment tool for investors seeking to express different regional economic views.
Celeste demonstrated how some of the indices outperformed following events such as Brexit and the COVID-19 pandemic by effectively capturing the impact of growth differentials, political risk and currency fluctuations.
We invite you to access the recording and learn more about the STOXX Focus indices.
[1] Domestic Revenue is defined as revenue generated from the region of the parent index.