Guggenheim Investments has rolled out a smart beta, multi-factor exchange traded fund that promises to help investors gain exposure to fundamental and non-fundamental factors.
On Tuesday, Guggenheim Investments launched the Guggenheim Multi-Factor Large-Cap ETF (NYSEArca: GMFL). GMFL has a 0.25% expense ratio.
“While many multi-factor strategies favor popular factors, like value, quality, or momentum, Guggenheim has advanced multi-factor investing by combining seven factors, both fundamental and non-fundamental, that seek to offer more stable performance across market cycles,” William H. Belden, Managing Director and Head of ETF Business Development for Guggenheim Investments, said in a note. “Although performance in the market may be driven at times by narrow factors that work well in the short term, the strategy selects stocks based on multiple factors based on long-standing research that may provide more consistent and reliable performance.”
The Guggenheim Multi-Factor Large-Cap ETF tries to reflect the performance of the Guggenheim Multi-Factor Large Cap Index total Return, which is comprised of about 50 equity securities selected from the S&P 500 using a Multi-Factor Composite Score, a rules-based methodology, to identify securities that will enhance returns, reduce risk and improve diversification, according to a prospectus sheet.
The Multi-Factor Composite Score will screen for securities with attractive exposures to several factors or investment characteristics. The factors included both fundamental factors, such as value, growth and quality, along with non-fundamental factors, like momentum, short interest, volatility and liquidity. The underlying index will also favor specific factors during specific periods.
The growth factor covers companies with growing revenue and earnings. Quality refers to well-managed companies. Liquidity includes the potential outperformance for less liquid stocks. Volatility refers to historically less risky stocks. Short interest will avoid stocks that are being shorted. Momentum includes recent upward price movement. Lastly, value covers those undervalued stocks.
“The Multi-Factor Composite Score uses multiple diversifying factors to seek to provide more consistent performance as compared to individual factor strategies that inherently experience cycles of performance when a particular factor is out of favor,” according to the prospectus.
Top sector tilts include information technology 23.0%, health care 14.1%, financials 14.1%, consumer discretionary 11.2% and industrials 10.1%.
Top holdings include Best Buy 2.4%, Applied Materials 2.3%, McKesson 2.2%, Quest Diagnostics 2.2% and XL Group.
For more information on new fund products, visit our new ETFs category.