The FTSE RAFI Low Volatility index, created by Research Affiliates in collaboration with index provider FTSE Russell, aims to increase risk-adjusted returns over the longer term by focusing on less volatile stocks.
The index is designed to break the link between portfolio weight and price by using fundamental measures of company size, and is based on research that shows it is possible to generate higher risk-adjusted returns for investors with a low volatility investment strategy.
LGIM said the FTSE RAFI Low Volatility mandate is the first of its kind in Europe.
“In times of economic turbulence the strategy is designed to give surety and meet specific performance criteria required by the PPF,” Adam Willis, Head of Index Fund Distribution at LGIM .
The Pension Protection Fund’s main function is to provide compensation to members of eligible defined benefit pension schemes, when there insolvency event in relation to the employer, and where there are insufficient assets in the pension scheme to meet its obligations.
Jason Hsu, co-founder and vice chairman, of Research Affiliates said: “All investors are different and have varying needs. With many markets richly valued, some are looking for an efficient way to de-risk the equity exposures within their portfolios.
“For these investors, a low volatility approach—like the FTSE RAFI Low Volatility strategy—may make a lot of sense,” he said.