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Scottish Widows invests in FTSE RAFI Index Series-linked funds

Scottish Widows is transferring GBP2.1 billion into portfolios linked to the FTSE RAFI Index Series. The mandate represents the largest single investment from a UK institutional investor into the FTSE RAFI Index Series.

The funds will be linked to three indices in the series: FTSE RAFI UK 300; FTSE RAFI Developed 1000; and FTSE RAFI Emerging Market, with the funds being run by Scottish Widows Investment Partnership (SWIP).
Launched in 2005 in partnership with Research Affiliates, LLC, the FTSE RAFI Index Series pioneered the area now referred to as “Smart Beta”-index-based strategies that offer the opportunity to outperform while retaining the benefits of traditional market-cap-weighted indices: rules-based, transparent, highly liquid, well-diversified approaches with low implementation costs. The key element is that these alternative index approaches break the relationship between market capitalisation and index weight. Total assets linked to the FTSE RAFI Index series including ETFs, mutual funds and institutional mandates globally stood at USD30 billion as of 30 June 2013, reflecting the growing demand for alternatively weighted indices.
Imogen Dillon Hatcher, Executive Director Global Sales, FTSE Group, says: “We are delighted that Scottish Widows has chosen to link three of its fund portfolios to the FTSE RAFI Index Series with a total of GBP2.1 billion in AUM. The mandate represents the largest investment by a single client in the UK and reflects FTSE’s strong track record in alternative weighted indices. We look forward to working with Scottish Widows, SWIP and Research Affiliates to affect a smooth transition of these portfolios”.
Michael Larsen, Director, Global Head of Affiliate Relations for Research Affiliates, says: “Since the launch of the FTSE RAFI Index Series, Smart Beta solutions have been taking the institutional market by storm. Research Affiliates has a long and successful partnership with FTSE, and we are pleased that Scottish Widows has chosen the FTSE RAFI Index Series for this very significant mandate”.
Iain McGowan, Head of Savings & Investments of Scottish Widows, says: “The FTSE RAFI Index Series provides access to a wide range of alternative weighted indices, which we believe can contribute towards generating returns for our customers. The allocation of GBP2.1 billion in AUM is an important step in repositioning the equity component of our multi-asset funds in line with the equity strategy that we announced last year.”

The FTSE RAFI methodology selects and weights index constituents according to fundamental measures of company size, namely: total cash dividends, free cash flow, total sales and book equity value. Since launch, the index series has expanded to include a wide range of global, regional and single country indices and has been adopted worldwide as a foundation for the creation of exchange traded products, and as an investable strategy index for institutional mandates.

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