February 27, 2008 at 1:00 am by Tom Lydon
A trio of new exchange traded funds (ETFs) launched on Friday, taking a different twist on the Standard & Poor’s benchmarks.
They will use the same stocks as the S&P but the ETF will weight names by revenue rather than market-cap sizes, reports Murray Coleman for Index Universe. Sean O’Hara, president of RevenueShares Investor Services, says that weighting by revenue was the most efficient way to keep the S&P benchmarks’ lineup the same while providing different patterns of return.
Some analysts don’t like the price so far: 0.49% in annual fees. O’Hara says that the returns based on back-tested data still would have been better than the S&P 500’s average annualized 11.4% between 1991-2007.
The new underlying indexes were created so investors wouldn’t fall prey to security selection bias. The new ETFs are:
- RevenueShares Large-Cap Fund (RWL): Aims to take the best of the S&P 500
- RevenueShares Mid-Cap Fund (RWK): Designed to complement the S&P 400
- RevenueShares Small-Cap Fund (RWJ): Replicates S&P 600
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February 27th, 2008 at 6:12 am
The fees concern me as well, but this is certainly something you have to consider especially if you index. It is appealing that the ETFs hold the same stocks and over time has better returns than market cap.