Elevation ETF Trust has come out with the first smart-beta, water sector-specific exchange traded fund that will select components based on factors like risk-to-return and yields.
The new Summit Water Infrastructure Multifactor Exchange Traded Fund (NYSEArca: WTRX) began trading on Wednesday. WTRX has a 0.80% expense ratio.
WTRX will try to reflect the performance of the Summit Zacks Global Water Index, which follows 30 to 50 companies engaged in the global water industry. Specifically, the underlying index will utilize a rules-based indexing methodology to incorporate fundamental factors that have been strong historical indicators of the long-term performance of water equities.
“As opposed to passive water indices that are constructed through various measures of market capitalization, equities are selected for inclusion in the Index by a proprietary formula of relevant company fundamentals including measures of price/earnings, intrinsic value, and return on capital,” Matt Dickerson, CEO of Summit Water Capital Advisors, said in a press release. “Through this methodology, the Index targets a more balanced and representative exposure to the global water industry that encompasses several world markets and broader capitalization levels, as opposed to a less-diversified basket of the largest, most expensive stocks.”
To be included in the underlying benchmark, companies have to be listed on a global stock exchange, have a market capitalization of no less than $200 million and have a three-month average daily trading value greater than $400,000.[related_stories]
The index also uses a ranking and weighting methodology designed to identify stocks that primarily derive their revenue from water-related business activities and provide the greatest potential in terms of yield and risk/return.