With much of the traditional beta space already populated, more exchange traded fund providers are engineering passive products that follow active styles. For instance, ALPS recently launched a suite of ETFs based on Goldman Sachs’ Proprietary Indices that allocate based on market volatility.
On Wednesday, ALPs added three new ETFs based on the “GS Momentum Builder” that provides exposure to select asset classes or markets with a hedge against volatility. The provider also launched a broad low-volatility type ETF as well, according to a press release.
“This collaboration helps us achieve our shared goal of providing ETF investors with thoughtful index-based investment alternatives with various types of market exposures,” Federico Gilly, managing director and head of the Equity sales Strats and Structuring Group at Goldman Sachs, said in the press release.
The new ETFs include:
- ALPS/GS Momentum Builder Growth Markets Equities and U.S. Treasuries Index ETF (NYSEArca: GSGO)
- ALPS/GS Momentum Builder Multi-Asset Index ETF (GSMA)
- ALPS/GS Momentum Builder Asia ex-Japan Equities and U.S. Treasuries Index ETF (GSAX)
- ALPS/GS Risk-Adjusted Return U.S. Large Cap Index ETF (GSRA)
The Momentum Builder series of ETFs include holdings that provide the highest six-month historical returns. However, unlike traditional momentum strategies, these ETFs will also take into account historical volatility and correlation as a way to manage risk. If the 3-month realized volatility exceeds the volatility cap, the index will partially reallocate to cash – the funds are rebalanced monthly. Each of these ETFs have a 0.68% expense ratio.
GSGO’s index allocations include iShares MSCI Mexico Investable Market Index Fund (NYSEArca: EWW) 30%, iShares MSCI South Korea Index Fund (NYSEArca: EWY) 10%, iShares FTSE/Xinhua China 25 Index (NYSEArca: FXI) 30% and iShares MSCI Turkey Investable Market Index Fund (NYSEArca: TUR) 30%.
GSMA’s index allocations include PowerShares DB Gold Fund (NYSEArca: DBB) 0.8%, iShares MSCI EAFE Index Fund (NYSEArca: EFA) 30%, WisdomTree Emerging Markets Local Debt Fund (NYSEArca: ELD) 30%, iShares JPMorgan USD Emerging Markets Bond Fund (NYSEArca: EMB) 30%, iShares iBoxx $ High Yield Corporate Bond Fund (NYSEArca: HYD) 4.5% and iShares Barclays 20+ Year Treasury Bond Fund (NYSEArca: TLT) 4.7%.