Last October, STOXX Ltd. licensed the STOXX® Global Fintech Index to Japan’s Sumitomo Mitsui Asset Management as an underlying for an investment fund.
The Global Fintech Index tracks companies leading the financial technology revolution, which is transforming the structure and operations of financial services. Based on FactSet’s Revere data, companies with at least 50% of their sales stemming in aggregate from more than 30 fintech-related sectors are selected for the index.
The Global Fintech Index is part of a growing thematic indices family at STOXX.
We caught up with Yudai Soshizaki, Head of the Product Development Team at Sumitomo Mitsui AM, to ask what’s driving demand for thematic investments covering emerging technologies and in particular for those following passive approaches.
Yudai, why did you choose fintech as the new thematic offering within your Innovation Index Series?
The fintech market is expected to grow exponentially, as traditional financial institutions are becoming more involved alongside start-ups and non-financial institutions. Fintech is one of the big trends that will transform the world but is still in the process of evolving, so we think there is plenty of room for this industry to grow in the medium to long term.
What is your Innovation Index Series about? How many products does it have, and which are these?
The Innovation Index Series is a family of index-linked funds that focus on innovative concepts and technologies, and on future high-growth industries. By investing in those companies that are part of these indices, we would like to provide investors with the opportunity to realize the benefits of stock price increases that should reflect the upside in those innovative industries. There are two products so far in the series – Innovation Index Fintech and Innovation Index AI.
Why did you choose STOXX for the Fintech strategy?
STOXX covers 65 countries and provides more than 10,000 indices, and we believe that they have a good track record of index development capabilities. Also, thanks to the corporate financial information that STOXX employs, its index methodologies are able to capture each business’s structure in a timely manner, and therefore accurately select the constituents for each index theme. In addition, the index construction process is straightforward, and this makes it easy for investors to understand the product.
What type of products are your clients demanding? Does this differ on the type of client, and how?
Our clients are demanding financial products that are in line with their life stage, return targets, risk appetite, cost tolerance, etc. In such an environment, we believe our Innovation Index Series will be embraced by investors who value long-term growth, cumulative investments and low costs.
How is the typical investor in your key markets changing in terms of strategies and investment approaches?
We have seen investors started funding their investment trusts by utilizing index-linked funds as individual defined contribution pension plans and a new tax exemption program for small investments have been adopted widely. More and more investors who are in their 30’s to 50’s are buying financial products on-line. They tend to prefer products with concepts or growth stories that are easy to understand and can be conveniently invested in online.
What role do you see indexing and passive investing taking in your markets in the next couple of years?
First of all, index or passive investing reduces the cost of investments. It has also provided opportunities for the rise of new investment strategies, such as smart beta. In the future, passive investments will take a more important role in financial markets as investment vehicles that meet investors’ needs and diversification.