Factor-Based ETFs

Amid the increase in market volatility recently, it is easy and understandably so, for some to overlook new ETF launches.

This is expected since most portfolio managers and larger institutions tend to generally require some minimum length of live tracking data or “live seasoning,” before considering a major allocation to an ETF strategy.

In late April, iShares announced a partnership with the Arizona State Retirement System in launching “factor-based” ETFs, MTUM (iShares MSCI USA Momentum Factor, Expense Ratio 0.15%), SIZE (iShares MSCI USA Size Factor, Expense Ratio 0.15%), and VLUE (iShares MSCI Value Factor, Expense Ratio 0.15%).

These ETFs are based around the universe within the MSCI USA Index (corresponding ETF is EUSA (iShares MSCI USA Index, Expense Ratio 0.15%) and hone in on securities that exhibit Momentum, or Value.

And in the case of the ETF SIZE, the underlying universe, the MSCI USA Index is re-weighted utilizing a rules-based methodology which proprietarily isolates stocks that display two things: smaller average market capitalizations as well as lower realized volatility as compared to the benchmark index itself.