STOXX has introduced a family of ‘UCITS-capped’ DAX indices that comply with single-stock weight limits in the European Union directive[1]:
“With the launch of the DAX UCITS series, we are reacting to market needs by providing a solution that especially buy-side clients can benefit from,“ said Serkan Batir, Global Head for Product Development and Benchmarks at STOXX. “We are expanding the optionality of the popular DAX suite so users can continue to benefit from its broader ecosystem and established methodology.”
Additionally, DAX Selection Indices with a maximum component weight of 10% were introduced:
All indices were launched Monday, March 18, 2024.
The expanded offering was designed to help asset managers comply with established fund regulations and broaden their choice of suitable benchmark indices. As of March 18, 2024, the DAX Selection Indices’ (DAX, MDAX, SDAX and TecDAX) weight cap for individual constituents was raised from 10% to 15%. This latest change followed a market consultation and aligned the flagship German benchmarks with international practices.
All other index rules remain the same as the flagship indices.
UCITS capping
A 4.5/8.5/35 capping method is used to comply with UCITS requirements. To arrive at it, all companies’ single weights are capped at a maximum of 8.5%. The components are then ranked from the largest to the smallest,[2] and the top five are allowed the following maximum weights: 8.5%, 7.5%, 7%, 6.5% and 5.5% (a maximum combined weight of 35). All other components are capped at 4.5%.
[1] The EU’s Undertakings for Collective Investment in Transferable Securities (UCITS) regulation dates from 2009 and aims to foster market efficiency in investment funds, ensure better investor information and enhance supervision of funds.
[2] If more than one component has a weight of 8.5% after the first cap, then the original weight is used to determine the ranking order.