Additional institutional usage of smart beta ETFs will provide ongoing liquidity for all investors, helping to keep the bid/ask spreads tight for these non-market-cap weighted ETFs. At the end of March, insurance provider Transamerica launched three new variable investment options that held a series of BlackRock’s iShares smart beta ETFs.
The iShares ETFs that are part of these variable annuities include iShares MSCI USA Quality Factor (QUAL) and iShares MSCI USA Minimum Volatility (USMV).
QUAL is constructed based on a broad U.S. MSCI index by screening for companies with high return on equity, stable year-over-year earnings growth and low financial leverage). The ETF ranks favorably to S&P Global Market Intelligence based on multiple risk considerations and cost factors. These include the credit quality of its holdings and its 0.15% expense ratio. QUAL has $2.3 billion in assets, aided by $289 million of net inflows according to etf.com.
USMV, which holds the least volatile stocks in all 10 GICS sectors, also ranks favorably to S&P Global Market Intelligence based on a variety of risk and cost attributes. These include the Quality Ranking of its holdings, its 0.15% expense ratio and penny bid/ask spread. USMV has $12 billion in assets, aided by $3.3 billion of net inflows.
S&P Global Market Intelligence has rankings on approximately 1,100 equity and fixed income ETFs based on a combination of holdings-level analysis and ETF-level attributes. Both QUAL and USMV earn our top ranking of Overweight.
Transamerica has used ETFs for years on its platform that supports mutual fund investors, have a platform that supports mutual fund investors, variable annuity sub accounts and retirement investors.