Compass EMP Funds, the Tennessee-based registered investment advisor and index developer, makes its first foray into exchange traded funds sponsorship today with the introduction of three alternatively-weighted ETFs.
The three new ETFs from Compass are the Compass EMP U.S. 500 Volatility Weighted Index ETF (NasdaqGM: CFA), the Compass EMP U.S. 500 Enhanced Volatility Weighted Index ETF (NasdaqGM: CFO) and the Compass EMP U.S. EQ Income 100 Enhanced Volatility Weighted Fund (NasdaqGM: CDC). All three ETFs will track indices created by Compass.
CFA tracks the CEMP U.S. Large Cap 500 Volatility Weighted Index, which ” is a passive broad market index consisting of the common stock of the 500 largest U.S. based companies with four quarters of positive earnings weighted based on their daily standard deviation,” said Compass in a statement.
Although the CEMP U.S. Large Cap 500 Volatility Weighted Index takes stocks’ standard deviation into account, CFA is not comparable to the low volatility ETFs currently on the market that so many investors have embraced. [Getting to Know Low Vol ETFs]
Sector weights are capped at 25%. Since the index’s inception in September 2000, it has gained almost 253% compared to 69.3% for the S&P 500, according to Compass data.
CFO tracks the CEMP U.S. Large Cap 500 Long/Cash Volatility Weighted Index, which “is a passive broad market index consisting of the common stock of the 500 largest U.S. based companies with four quarters of positive earnings weighted based on their daily standard deviation,” according to Compass.
CFO offers investors a unique “airbag” approach in that it can move to a cash position of up to 75% in the event of a significant market pullback. As stocks rebound from that hypothetical decline, CFO’s underlying index begins reducing cash and adding equity exposure, providing investors with the advantages of dollar-cost averaging.
Top-10 holdings in CFO’s underlying index include Dow components McDonalds (NYSE: MCD), Wal-Mart (NYSE: WMT) and Johnson & Johnson (NYSE: JNJ).
CDC tracks the CEMP U.S. Large Cap High Dividend 100 Long/Cash Volatility Weighted Index, also a passive index that is comprised of the ” highest dividend yielding stocks of the CEMP U.S. Large Cap 500 Volatility Weighted Index,” said Compass.
CDC also features the ability to move to up 75% its index experiences an 8% from its daily highest value. Since inception in September 2000, CDC’s index has outperformed the S&P 500 by seven-to-one, according to Compass data.
At the end of the first quarter, the CEMP U.S. Large Cap High Dividend 100 Long/Cash Volatility Weighted Index had a dividend yield of 3.54% with top-10 holdings including McDonald’s, Duke Energy (NYSE: DUK) and ConocoPhillips (NYSE: COP).
ETF Trends editorial team contributed to this post.