Among smart beta ETFs, the ProShares Large Cap Core Plus (NYSEArca: CSM) is a seasoned veteran. The fund will turn 10 years old in July.
CSM overweights attractive stocks while taking a short position in unfavorable stocks, may be seen as a type of smart beta, long-short strategy.
CSM starts off with the company stocks of 500 leading large-cap U.S. companies, which are then scored based on the expected outlook for each stock using the 10 equal-weighted screens, including historical growth, expected growth, profit trends, accelerating sales, small size, price reversal, price momentum, earnings momentum, relative value and traditional value.
A primary benefit of CSM is the potential for out-performance of traditional active and passive large-cap strategies.
“Ninety-five percent of active funds failed to beat the S&P 500 over time, and most passive strategies are designed only to match market returns. But CSM has beaten the S&P 500 since the fund’s inception on 7/13/09,” according to ProShares.
Delivering The Goods
Year-to-date, CSM is beating the S&P 500 by 40 basis points, but this is not a new phenomenon. From 2013 through 2018, CSM topped the S&P 500 in four of those six years, often while sporting comparable volatility to the benchmark U.S. equity gauge.
“CSM has outpaced the S&P 500 in 96% of rolling five-year periods, and its record of besting the S&P 500 on a month-over-month basis surpasses 95% of all large-cap blend mutual funds and ETFs,” according to Maryland-based ProShares.
CSM’s underlying index then optimizes the portfolio, using the scores of the 10 screened factors to overweight stocks with the most favorable outlooks and underweight or short positions in company stocks with less favorable prospects. Lastly, the portfolio will end up with 130% long exposure and 30% short exposure, based on the weightings from the factor scores.
At the end of last year, CSM had long positions in 320 companies and short positions in 136 stocks, according to issuer data.
“One of the longest-running smart beta funds, CSM’s strategy combines multiple well-established factors to achieve performance. The result is a portfolio designed to turn incremental returns over time into consistent outperformance,” notes ProShares.
For more on core investing strategies, please visit our Core ETF Channel.