Mitsubishi UFJ Trust and Banking Corp (MUTB) has licensed the iStoxx MUTB Japan Quality 150 Index to be used for an institutional passive fund. The newly launched index aims to capture the performance of quality companies with high profitability, low leverage and sustainable cashflows in Japan.

The product is the first to come out of the joint venture between Stoxx and MUTB, announced in August, to launch the smart beta benchmark, according to Yoshiyuki Masuda (pictured), manager of the index strategy fund management division at MUTB. “We started collaborating with Stoxx in order to develop new smart beta indices, and leverage MUTB’s investment expertise in global markets,” said Masuda. “This is a step forward in providing more solutions to the diversified demand of both institutional and retail investors.”

The iStoxx MUTB Japan Quality 150 Index is derived from the Stoxx Japan 600 Index. For all components in the underlying index, a combined ranking of four fundamentals ratios (return on equity, debt-to-capital, cashflow generation ability and business stability), as well as a liquidity screen, is calculated. They are then ranked on the selection list according to these scores. The top 150 stocks on the selection list are eligible for inclusion in the index.

Investor expectations around smart beta strategies and benchmarks will continue to increase as their needs will also continue to diversify, according to Masuda. “We believe that it is our mission to cater to such client needs and demands, through close interaction with the market, and ongoing focus on strengthening our investment expertise,” said Masuda. “Since this type of underlying is an index by itself, technically it can also be used for structured products.”

Masuda said that some companies “of whom we cannot give details” have expressed interest in launching new funds, and structured products based in the new iStoxx MUTB Japan Quality 150 Index. “This has given us more opportunities to talk about its features and our thinking behind it,” said Masuda. “We will continue to develop products linked to smart beta indices. It is important to diversify strategies in view of various possible market scenarios.”

The iStoxx MUTB Japan Quality 150 Index is weighted by freefloat market capitalisation, with a single component’s weight cap of two percent, and is calculated in price, net and gross return versions and is available in euros, Japanese yen and US dollars.

MUTB is a subsidiary of the Mitsubishi UFJ (MUTJ) Financial Group and had assets of ¥31.4tr (US$261.9bn) as of March 31, 2014, making it one of Japan’s largest trust banks. MUTJ is the leading provider of structured products in Japan with a 25% market share and more than ¥640bn (US$5.3bn) of product sales in 2014. The Japanese bank has more than 500 live products in Japan’s retail market either as distributor (457 products) or counterparty provider (46 products).

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