Goldman's Emerging Markets ETF Finds Rapid Success

Last year, more than 280 new exchange traded products came to market in the U.S., including three exchange traded funds courtesy of Goldman Sachs Asset Management (GSAM).

The Goldman Sachs ActiveBeta Emerging Markets Equity ETF (NYSEArca: GEM) is a success story, a story made all the more impressive when considering that investors eagerly dumped traditional, big-name emerging markets ETFs last year.

Like the Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF (NYSEArca: GSLC), Goldman’s first ETF, GEM is a factor-based fund. 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.

GEM “cuts the MSCI Emerging Markets Equity universe across four investment factors—value, momentum, quality and low volatility. Stocks are screened and weighted along each factor and combined into an index so that each factor’s weighting accounts for a quarter of the ETF’s exposure, rebalanced quarterly,” reports Ari Weinberg for the Wall Street Journal.