Think Smarter: Nasdaq's Smart Beta Investment Strategy

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Think Smarter: Nasdaq's Smart Beta Investment Strategy PART 1 OF 18

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In this series, Market Realist interviews two employees at Nasdaq.  We first hear from Dave Gedeon, Head of Research and Product Development, Nasdaq Global Information Services.


Market Realist: Please walk us through the history of Nasdaq’s involvement in smart beta, Nasdaq’s indexing, and how your recent acquisitions fit into this.

Dave: During my time here, I recognize two eras. The first one goes back to when we were a product sponsor with the Qs (QQQ). Once that was transferred over to Invesco PowerShares, Nasdaq focused on index development. Around 2006-07 and forward, our goal was to develop unique indexes that differentiate ourselves versus broad-based benchmarks. So we’ve always been involved in what’s now called smart beta.

Whether we go back to the early aspects of equal weighting, perhaps one of the simplest yet effective versions of smart beta, or look at some of the alternative weighting strategies that we have developed, we’ve been focused on developing our own brand around Nasdaq Indexes. In 2012, we made our first acquisition with the Mergent Index business focused on the Dividend AchieversTM brand. At the time, we had begun our own dividend and income-related work as we saw this as an extremely important aspect of modern day investing. An aging population and low yields gave a powerful boost to the dividend story, and it was something that we wanted to build out.

So we had an opportunity to acquire and build out that family [of Dividend Achievers products] and spent a lot of time bringing it to new markets, enhancing existing methodologies, and creating new ones.  Incorporating our own methodologies into that family, we’ve been a driver in the theme of “dividend as smart beta.”

Last year, with the acquisition of Dorsey, Wright & Associates, we strengthened that offering and integrated factor investing into smart beta – those factors being relative strength or momentum. As we continue to develop our smart beta strategies, we’re examining how to tactically partner or acquire other teams who can help complement what we’re in the process of building.

Market Realist’s View:
Weighting and current holdings

The NASDAQ US Broad Dividend Achievers Index comprises securities with at least ten consecutive years of increasing annual regular dividend payments. As of June 30, the index comprises 274 securities. The industry with the most weight is consumer goods, with a weight of 19.1%, followed by industrials (15.4%), consumer services (13.7%), oil and gas (10.5%), technology (9%)(IYW), and healthcare (8.6%).

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The top five securities in the index comprise Johnson and Johnson (4.2%)(JNJ), Exxon Mobil (4.1%)(XOM), AT&T (3.9%)(T), Microsoft (3.7%)(MSFT), and Walmart (3.3%)(WMT).



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