WisdomTree has launched a smart beta UK Equity Income exchange-traded fund (ETF), focusing on top dividend yielding companies.
The ETF will invest in 33 per cent of UK domiciled companies from the WisdomTree UK Equity universe, or 103 stocks.
WisdomTree said it would be fundamentally weighted to account for the absolute amount of dividends paid by companies, weighting appropriately for income.
However, to ensure diversification, the firm said it would cap single stocks at 3%, and sector exposure at 25%, of the index.
The firm said it believed smart beta indices weighted by dividends or higher-yielding companies tend to outperform traditional market cap over the long-term, citing research by Jeremy Siegel, a US-based finance academic.
Viktor Nossek, director of research at WisdomTree Europe said the new ETF had a large cap bias, with 83% of constituents having a market capitalisation greater than £10bn.
He added: “The ETF provides for greater diversification than is typical in other UK income strategies.”
Mr Nossek said the 5.9 per cent historic dividend yield, quoted on a trailing 12 month basis, “compares favorably to competing indices”.
The launch comes as investors are pouring more money into passive portfolios. Tracker funds alone accounted for 75 per cent of the £690m in net retail sales seen in August.
