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.
GEM entered Monday’s trading session with over $537 million in assets under management, easily making it one of the most successful ETFs to debut last year.
Financial services stocks are over a quarter of GEM’s weight while technology and consumer staples names combine for nearly a third of the ETF’s sector weight. In terms of geography, Asia ex-Japan is GEM’s largest regional weight at nearly 72% while Latin America is just 11.3% of the ETF’s weight. That could be a positive as Latin American stocks continue to struggle.
“Unlike smaller new issuers, Goldman was able to introduce this ETF with a discounted expense ratio of 0.45% of assets annually, compared with its stated gross expense ratio of 0.76%,” according to the Journal.
At 0.45% per year, GEM’s annual fees are lower than those found on some other smart beta emerging markets ETFs.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.