5In that vein, one of the company's first priorities was to expand its Dow Jones Select Dividend IndexSM series to include European-region indexes in response to growing demand for more robust dividend-focused strategies. The family already included a number of country-specific indexes for Europe, and the time was right to complement those with regional indexes. Companies are selected for the indexes using several fundamental factors to identify high-quality dividend leaders: dividend growth, earnings growth and return on equity. A second series of indexes also has a dividend-based theme. "Our new 'distributing' indexes are the first of their kind. They're designed to offer greater transparency into that portion of index returns that can be attributed to dividends," Deborah says. She goes on to explain that the index is designed to provide greater insight as to how dividends paid by an index's constituent companies can impact index returns. The new calculation methodology was applied to indexes in the Dow Jones Select Dividend IndexSM family, including the new Europe and Eurozone indexes, as well as indexes for France and Germany.Volatility is another key theme addressed by these new indexes. Risk is on everyone's minds, says Deborah, due to volatile markets around the globe, and in Europe in particular. That is why Dow Jones Indexes launched the Dow Jones Volatility Risk Control IndexesSM, including the Dow Jones Europe Titans 80 Volatility Risk Control IndexesSM and the Dow Jones Eurozone Titans 80 Volatility Risk Control IndexesSM. Each series includes several variants at volatility increments of 5% (the most conservative), 10%, 15% and 20% (the most aggressive)."These indexes use a risk-control overlay on the underlying indexes," she explains. "Each index uses a rebalancing formula to maintain the target risk level. When market volatility exceeds the target level, the index automatically allocates part of its weighting to cash. When the volatility is below the target level, that cash allocation is reduced accordingly."Tools for growthDeborah points out that with these new indexes, Dow Jones Indexes now offers a complete toolkit for following the European markets. When asked if the company has plans for future growth, she replies in the positive. She explains that the current range of offerings, while already robust, is considered to be a "basis from which we plan to expand.""Our European clients have been asking for more indexes and more innovation. We're continually working on niche concepts and ideas to try to meet their needs." Deborah explains that the growth of passive investing is helping to drive this new push. "Clients are seeking a wide array of alternative indexes and multi-asset class products to complement traditional active portfolios. So we're constantly challenged to come up with new index concepts in an effort to meet these demands." Pointing to a Quarter 2, 2011, report compiled by asset management giant BlackRock, Deborah notes that for the first half of this year, there were 1,185 ETFs in Europe with assets under management of US$321.2 billion. This compares with 961 ETFs with US$218.0 billion in assets under management for the same period in 2010. European-listed ETFs took in US$19.2 billion in new assets in the first half of the year, with more to come in the second half."Our indexes serve as both benchmarks and the basis for a variety of products in this region," she says. "We believe there will continue to be plenty of growth opportunities."For more information on our new indexes for Europe, visit: >> www.djindexes.com/focuseurope"With markets as uncertain as they've been of late, investors are looking to diversify their risk."
6Customer SpotlightAxel Lomholt, Head of iShares ETF Product Development, EMEA Insights: Could you tell us a little about your role at iShares?Lomholt: I'm the Head of Product Development for iShares' EMEA (Europe Middle East Africa) region. We're responsible for the creation of investment products across multiple asset classes, such as physical and swap-based ETFs and physical notes.Insights: You recently launched European ETFs based on the Dow Jones Sustainability IndexesSM. Why did you decide that now is the right time to launch sustainability-themed products?Lomholt: When considering expanding our existing ESG (environmental, social, governance) offerings, we consulted with the various iShares sales teams to gauge whether there was sufficient demand at this time for additional products of this nature. The feedback that we received was very positive, indicating that there's great investor demand for ESG products.Insights: How did iShares decide to enter this market?Lomholt: We recognize that ESG investment is becoming increasingly important for certain client segments. We had discussions with our in-house BlackRock ESG specialists and we got to understand our clients' demands via the iShares sales teams. So we decided that we would launch two new products that meet the majority of our clients' needs.Insights: Do you see regional differences in investor interest in sustainability?Lomholt: In Europe, sustainable investing has been growing in importance during the past decade, most notably in the Nordic countries, as well as the Netherlands and the U.K. Germany's interest in this area also appears to be growing. These two new products are currently listed in three locations: the U.K., Netherlands and Germany. We're also registered in eight other European countries.Insights: The indexes you chose screen for "sin" industries such as alcohol, tobacco, gambling, armaments and firearms. What drove your decision to choose these versions?Lomholt: The index construction and screening was selected based on client feedback. These exclusions meet the majority of our clients' needs.Insights: What has the market reaction been to your sustainability products?Lomholt: Our sales teams have received positive client feedback, while we have seen modest asset flows. This is not surprising given the current market volatility. There's also a time lag in cross-registrations and listings in Europe.Insights: Why did you choose Dow Jones Indexes as your index provider for your sustainability products?Lomholt: Dow Jones Indexes is the leading index provider in this space and the most established in Europe. SAM is an investment boutique focused exclusively on sustainability investing since 1995 and has partnered with Dow Jones Indexes in providing sustainability indices since 1999. Their screening methodology was preferred to other providers because it has:- Annual reviews together with daily monitoring, which allows companies to be excluded from the index prior to a rebalance if there is a market event or extraordinary circumstances, such as the BP oil spill.- Quarterly rebalancing, which is great, since many alternative indexes are only rebalanced annually.Axel LomholtHead of iShares ETF Product Development, EMEA