ETF Securities, the London-based exchange traded funds issuer known primarily for its lineup of commodities funds, is making a foray into equity-based funds with the introduction of two new ETFs.
The ETFS Zacks Earnings Large-Cap U.S. Index Fund (NYSEArca: ZLRG) and the ETFS Zacks Earnings Small-Cap U.S. Index Fund (NYSEArca: ZSML) launched Tuesday.
“ETF Securities and Zacks developed the new ETFs to capture Zacks’ proprietary investment ranking strategy based on earnings estimate revisions and earnings quality, which have been shown to greatly impact stock prices. While offering the potential for enhanced returns, key steps have been taken to help mitigate risk. These steps include high liquidity and capacity screens, and a focus on high diversification across sectors and stocks. The combination of the investment strategies with the risk management overlay aims to deliver more consistent total returns at a lower cost,” according to a statement issued by ETF Securities.
The ETFS Zacks Earnings Large-Cap U.S. Index Fund tracks the Zacks Earnings Large-Cap U.S. Index, which is home to 142 stocks. That index selects companies using a quantitative model followed by qualitative analysis. Only the top 5% of stocks ranked “Strong Buy” are eligible for inclusion.
The index had annualized volatility of 14.7% and a Sharpe ratio of 2.1 at the end of last year, according to ETF Securities data. No stock accounts for more than 1.62% of ZLRG’s weight and top 10 holdings include Weyerhaeuser (NYSE: WY), Honeywell (NYSE: HON), Raytheon (NYSE: RTN) and Dow component 3M (NYSE: MMM).
The ETFS Zacks Earnings Small-Cap U.S. Index Fund is benchmarked to the Zacks Earnings Small-Cap U.S. Index, which uses the same quantitative then qualitative approach as its large-cap counterpart. That index is home to 139 stocks.
Fifteen industry groups with weights ranging from 6.31% to 6.81% are represented in ZSML. No stock accounts for more than 3.48% of the new ETF’s weight. Top holdings include B/E Aerospace (NasdaqGS: BEAV), Spirit Aerosystems (NYSE: SPR), Teco Energy (NYSE: TE) and Lear (NYSE: LEA).