The smart beta ETF’s underlying index adjusts security weights by relative price and profitability. The underlying index 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.
JHMM follows a “time-tested multifactor approach, emphasizing factors (smaller cap, lower relative price, and higher profitability) that academic research has linked to higher expected returns,” according to John Hancock.
JHMM’s top sector weights include information technology 17.4%, industrials 15.8%, financials 15.2%, consumer discretionary 12.4% and health care 9.4%. In comparison, the benchmark S&P MidCap 400 Index is more overweight financials, real estate and materials when compared to the smart beta JHMM portfolio.
Financial advisors who are interested in learning more about the middle capitalization category can register for the Tuesday, Ma 8 webcast here.