Today, Goldman Sachs launched a new domestic equity exchange traded fund that promises to be the least expensive smart-beta offerings on the market today.
“This smart-beta ETF will be priced like traditional beta products,” said Michael Crinieri, Managing Director at Goldman Sachs.
Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF (NYSEArca: GSLC), will have a 0.09% expense ratio, equal to the SPDR S&P 500 ETF (NYSEArca: SPY). The low expense ratio is quite surprising as most smart-beta index-based ETFs carry greater fees due to their customized nature.
There are 372 U.S.-listed equity ETFs that track non-market-capitalization-weighted indices, with an average expense ratio of 0.56%, according to XTF data. Enhanced large-cap ETFs have an average 0.49% expense ratio and enhanced small-cap/micro-cap ETFs have an average 0.55% expense ratio.
Goldman Sachs is crafting new ETFs in response to increased demand from clients for Goldman investment strategies in ETF form; especially among its institutional and insurance-based clients.
“Our clients are asking ‘Do you have this in an ETF wrapper?,’” said Steve Sachs, Head of Capital Markets at Goldman Sachs
The new Goldman Sachs smart-beta ETF has also come to market with seed money from an interested institutional investor. Although Goldman would not share the name of the client, the total investment capital is quite impressive; $50 million.
“ActiveBeta is our response to the solution that we’ve been asked to provide and we’re committed to the ETF space,” said Sachs.
The new Goldman Sachs ETF’s underlying index will implement multi-factor strategies through its patented ActiveBeta Portfolio Construction Methodology that provides exposure to factors commonly tied to a stock’s outperformance relative to market returns.
Specifically, the factors include value or how attractively a stock is price relative to fundamentals like book value and free cash flow; momentum or the current up or down trend in a company stock; quality or profitability; and low volatility or the degree of fluctuation in a company’s share price over time.
ETF pundits seem to agree that this is not a flash in the pan for Goldman. Few recent ETF startups have shown this type of commitment when considering resources, funding and client involvement.
Expect more will be coming. According to an updated Securities and Exchange Commission prospectus filing, Goldman filed for five other smart-beta index ETFs:
- Goldman Sachs ActiveBeta Emerging Markets Equity ETF (NYSEArca: GEM), which will have a 0.45% expense ratio.
- Goldman Sachs ActiveBeta Europe Equity ETF (NYSEArca: GSEU), which will have a 0.35% expense ratio.
- Goldman Sachs ActiveBeta International Equity ETF (NYSEArca: GSIE), which will have a 0.35% expense ratio.
- Goldman Sachs ActiveBeta Japan Equity ETF (NYSEArca: GSJY), which will have a 0.35% expense ratio.
- Goldman Sachs ActiveBeta U.S. Small Cap Equity ETF (NYSEArca: GSSC), which will have a 0.25% expense ratio.
For more information on new fund products, visit our new ETFs category.