Goldman Sachs expanded its suite of “ActiveBeta” exchange traded funds Tuesday, adding a relatively cheap, smart-beta option for emerging market exposure.
The Goldman Sachs ActiveBeta Emerging Markets Equity ETF (NYSEArca: GEM), which tries to reflect the performance of the Goldman Sachs ActiveBeta Emerging Markets Equity Index, began trading Tuesday, according to a press release.
“We see growth opportunities across various sectors in emerging markets, and the Goldman Sachs ActiveBeta Emerging Markets Equity ETF is designed to capture returns from these pockets of growth,” Michael Crinieri, GSAM’s Global Head of ETF Strategies, said in the press release. “As investors continue to look for new ways to increase their exposure to international equities, we are pleased to bring to market a product that provides them that access and diversification in their portfolios at a reasonable cost.”
GEM has a 0.45% expense ratio. The ETF is among the cheapest priced on the market. U.S.-listed emerging market ETFs have an average expense ratio of 0.62%, and U.S.-listed smart-beta equity ETFs have an average expense ratio of 0.56%, according to XTF data.
Since the new Goldman ETF will be up against more well-known emerging market funds that enjoyed a first mover advantage, the cheaper price tag could help GEM stay competitive in a populated field.
Additionally, the new ETF will try to outperform the emerging market by following a performance-seeking methodology. Specifically, the ETF will select component holdings from the MSCI Emerging Markets Index based on good value, strong momentum, high quality and low volatility.
Goldman identifies value stocks as companies that may be undervalued by the rest of the market. Momentum stocks are those that have experienced growing prices. Companies will also have to show sustainable profitability over time to meet quality preferences. Lastly, the underlying index will select stocks that exhibit low volatility so as to avoid extreme price swings.