John Hancock is joining the quickly growing field of smart-beta, index-based exchange traded funds as the money manager launches six multi-factor ETF strategies.
According to a press release, John Hancock debuted with six offerings, including:
- John Hancock Multifactor Large Cap ETF (NYSEArca: JHML), which has a 0.35% expense ratio.
- John Hancock Multifactor Mid Cap ETF (NYSEArca: JHMM), which has a 0.45% expense ratio.
- John Hancock Multifactor Consumer Discretionary ETF (NYSEArca: JHMC), which has a 0.50% expense ratio.
- John Hancock Multifactor Financials ETF (NYSEArca: JHMF), which has a 0.50% expense ratio.
- John Hancock Multifactor Healthcare ETF (NYSEArca: JHMH), which has a 0.50% expense ratio.
- John Hancock Multifactor Technology ETF (NYSEArca: JHMT), which has a 0.50% expense ratio.
Each of the new John Hancock Multifactor ETFs will track indices developed by Dimensional Fund Advisors, which will act as the subadvisor to the funds.
The smart-beta indices will follow a rules-based selection process that may be seen as a multi-factor approach. Securities are adjusted by relative price and profitability. Specifically, the underlying index may overweight stocks with lower relative prices and underweight names with higher relative prices. The index can also adjust for profitability by overweighting stocks with higher profitability and underweighting those with lower profitability.
Additionally, the underlying index implements market-capitalization adjustments where it increases the weights of smaller companies within the eligible universe and decreases the weights of larger names. The weighting methodology suggests that the ETFs may follow a more equal-weight tilt with greater exposure to smaller companies than traditional market-cap weighted index funds.
“Our approach is rooted in decades of academic research into the factors that drive higher expected returns. In the equity markets, we believe this means smaller capitalizations, lower relative prices, and higher profitability,” Eduardo Repetto, co-CEO and co-CIO of Dimensional Fund Advisors, said in the press release. “Each of the John Hancock Multifactor ETFs seeks to track an index constructed to emphasize and balance those factors while managing investment costs.”
JHML will select company stocks whose market capitalization are larger than that of the 801 largest U.S. companies at the time of reconstitution, according to the latest SEC filing.
JHMM will select company stocks whose market capitalization fall between the 200th and 951 largest U.S. companies at the time of reconstitution.