UK – State Street Global Advisors says it is getting a lot of interest from European institutions in its enhanced index funds.
“We are seeing a lot of interest from European institutions,” said State Street senior investment manager Simon Roe.
State Steet is the ninth largest asset manager in terms of European pension fund assets, with 58.9 billion euros under its wing. It now has 12 billion dollars under management in enhanced index funds, up from two billion dollars a year ago.
Roe told journalists at a presentation that enhanced indexing aims to provide “modest but consistent” incremental investment returns. The technique provides index-like returns by making lots of small bets at the level of an individual stock, instead of a small number of large bets.
“What we are doing is taking lots and lots of small positions,” Roe said.
He says that enhanced indexing generates fewer stock transactions, around 25%-30% of a portfolio a year, compared to traditional active indexation, which can have over 60%.
“Trading costs are a really important part of this strategy,” Roe added. State Street recently launched four enhanced index funds covering the UK, Europe, US and Pacific including Japan.