The third step in the selection process employs risk premia factors such as strong governance, higher relative quality, positive momentum and earnings quality, according to Vident. Vident then uses a risk-balance approach to sector weightings. The resulting portfolio is 500 large-, mid- and small-cap companies.
VIDI, Vident’s first ETF, launched in the fourth quarter of 2013 and already has $578.2 million in assets under management, making it one of the most successful ETF debuts of 2013.
For VIDI, Vident’s index methodology includes selecting 35 of the most liquid developed and emerging markets outside the U.S. Constituent countries are initially equal-weighted before being re-weighted to account for risk factors. [Interesting New ETFs]
The countries are evaluated across growth, sound money, political stability and value factors. VIE rebalances twice a year and “seeks to reduce country, currency, and company concentration risks that can sometimes be typical amongst traditional capitalization-weighted approaches,” according to Vident.