The quality factor combines measures of profitability, like return on assets, asset turnover ratio and accruals, with leverage. The low volatility factor uses the standard deviation of five years of weekly local total returns. Lastly, the yield factor is calculated using the company’s twelve month trailing dividend yield.
The combination of factors should help investors gain exposure to companies that generate cash flow and pay dividends, protect investment capital by diversifying and limiting volatility, and invest in quality companies with strong financial performance that could appreciate in value over time.
Company stocks with the smallest product of combined factor scores are removed from the index. Components with higher scores are given greater weights, capped at 5% at each quarterly rebalance.
Current top holdings include Nestle SA 4.8%, Roche Holding 3.9%, Novartis 2.6%, British American Tobacco 2.1% and Sanofi 2.0%.
Sector weights include consumer staples 19.1%, health are 17.7%, materials 7.2%, telecom services 7.0%, financials 8.0%, real estate 7.9%, industrials 11.9%, utilities 7.0%, consumer discretionary 8.4%, information technology 2.3% and energy 2.7%.
For more information on new fund products, visit our new ETFs category.