John Hancock has filled out the gaps in its smart-beta exchange traded fund suite with five new sector-specific ETFs backed by Dimensional Fund Advisors’ research-based factor investing.
According to a press release, John Hancock’s new funds include:
- John Hancock Multifactor Consumer Staples ETF (NYSEArca: JHMS)
- John Hancock Multifactor Energy ETF (NYSEArca: JHME)
- John Hancock Multifactor Industrials ETF (NYSEArca: JHMI)
- John Hancock Multifactor Materials ETF (NYSEArca: JHMA)
- John Hancock Multifactor Utilities ETF (NYSEArca: JHMU)
Along with its six other smart-beta ETFs, John Hancock’s funds track indices developed by Dimensional Fund Advisors. The smart-beta ETFs’ underlying indices select components based on company size where a premium is given on smaller companies over larger companies, relative price where value stocks are selected over growth and profitability where more profitable companies are overweight. [Smart-Beta ETFs Backed by Financial Science]
The underlying indices adjust securities by relative price and profitability. The smart-beta indices 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 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.
“Combining multiple factors better equips a portfolio to smooth out the variability of returns and improve the likelihood of outperformance across different types of markets compared with single-factor approaches,” Andrew G. Arnott, President and CEO at John Hancock Investments, said.
JHMS leans toward foods and beverages, including a 28.4% position in food products, 22.9% in food & drug retailing, 22.4% in beverages, 13.9% household products, 10.9% tobacco and 1.5% personal products. Top holdings include Coca Cola (NYSE: KO) 6.2%, Pepsico (NYSE: PEP) 6.1% and Procter & Gamble (NYSE: PG) 6.1%.
JHME has a heavy tilt toward integrated oil & gas 75.5%, along with energy equipment & services 19.7%, gas utilities 1.9%, electric utilities 1.8% and electrical equipment 1.1%. Energy ETF investors may notice that John Hancock’s offering is much less top heavy than other market cap-weighted energy ETFs. Top holdings include Chevron (NYSE: CVX) 6.2%, Marathon Petroleum (NYSE: MPC) 5.9% and Exxon Mobil 5.7%.
[related_stories]JHMI’s sector weights include machinery 12.6%, aerospace & defense 11.6%, industrial conglomerates 10.2%, IT consulting & services 9.3% and commercial services & supplies 7.7%. Top holdings include General Electric (NYSE: GE) 4.7%, 3M Co. (NYSE: MMM) 2.0% and United Technologies (NYSE: UTX) 1.8%.
JHMA sector tilts include chemicals 72.5%, metals & mining 18.3%, paper & forest products 5.8%, commercial services & supplies 2.0% and machinery 1.5%. Top components include Dow Chemical (NYSE: DOW) 5.9%, Lyondellbasell Indu (NYSE: LYB) 5.9% and International Paper (NYSE: IP) 5.8%.
Lastly, JHMU sector weights include electric utilities 74.2%, multi-utilities 12.9%, gas utilities 10.1% and water utilities 2.8%. Top holdings include Consolidated Edison (NYSE: ED) 5.8%, Exelon Corp (NYSE: EXC) 5.3% and Public Service Enterprise (NYSE: EPG) 4.8%.
The five new funds each come with a 0.50% net expense ratio.