Share buybacks can boost shareholder returns. A new exchange traded fund has been launched in Europe so that investors can tap into when big US firms do this.

Amundi ETF, the European investment house focused on exchange traded funds, has rolled out a fund tracking an index of blue-chip US stocks affected by share buybacks, another trend in what is called “smart beta” ETFs.

The firm’s ETF is the first of its kind in Europe to mimic returns from the S&P 500 Buyback Index, Amundi said. This new fund is planned to be listed on Euronext Paris on 17 February and will be cross-listed soon on the main European markets, it said in a statement yesterday.

The index measures the investment performance of the top 100 stocks in the S&P 500 index with the highest buyback ratio over the previous 12 months. Constituents are equally weighted, enabling a pure exposure to the buyback theme. The S&P 500 Buyback Index has outperformed the S&P 500 for 17 out of the last 20 years, Amundi said.

While the definition of smart beta varies, one fairly common definition is that a smart beta fund, for example, tracks a style index or uses a mechanical investing strategy to obtain the returns associated with a particular strategy without the cost of active management. One example might be an index tracking returns obtained by value investing. Late last year, Invesco PowerShares said demand for such products in Europe is growing rapidly.

Amundi said the buyback investment theme is supported by a “sustainable trend” in corporate payout policy in the US, observed since the end of the 1990s, whereby share repurchases exceed cash dividends and have become the dominant form of corporate payout. Share buyback programmes can be triggered by strong balance sheets or undervalued stocks: either a cash rich company chooses to return capital to shareholders or, if its stock is undervalued, it chooses to take advantage of this low valuation.

The new ETF has a total expense ratio of 0.15 per cent.