In the ongoing struggle to efficiently access markets, more investors have turned to factor-based exchange traded fund strategies in an attempt to outperform broad market indices and better manage risks.
On the upcoming webcast, Power up Your Small Cap Portfolio: A Factor-Based Approach to Small Caps, Salvatore Bruno, Chief Investment Officer and Managing Director for IndexIQ, and Marc Chaikin, CEO of Chaikin Analytics, will identify factors that have helped generate attractive risk-adjusted returns. Specifically, they will discuss an index-based theme that looks to the Chaikin Power Gauge, a multi-factor stock selection model, and its implementation into investment strategies to help enhance a portfolio.
The recently launched the IQ Chaikin U.S. Small Cap ETF (NasdaqGM: CSML) tries to reflect the performance of the Nasdaq Chaikin Power US Small Cap Index, which applies a shareholder yield screen and the so-called Chaikin Power Gauge, a quantitative multi-factor model that tries to identify securities that are expected to outperform their peers, to select components from the Nasdaq US 1500 Index. The target focus will include small capitalization stocks.
The smart beta ETF’s underlying index will identify each security’s ability to outperform market-weighted products and active strategies. The Chaikin Power Gauge is a 20-multi-factor model that screens for value, growth, technical and sentiment factors, such as price-to-book value, return-on-equity, free cash flow, price trends, relative strength, volume trend, earnings growth, earnings trends, projected price/earnings ratio, insider activity, short interest and earnings estimate trends. Many of these factors have been utilized by institutional investors and money managers as a way to manage risk or potentially enhance a portfolio’s return.
The ETF’s sector weights include a hefty tilt toward financials 29.4% and industrials 23.3%, along with consumer services 13.5%, technology 11.7%, consumer goods 10.8%, basic materials 5.5%, health care 3.2%, oil & gas 1.1%, utilities 0.9% and telecommunications 0.5%.
The fund also more-or-less equally weights its holdings, with top components including Hooker Furniture 0.6%, IDT Corp 0.6%, Vectrus 0.6%, Hyster Yale Materials 0.6% and Container Store Group 0.6%.
Financial advisors who are interested in learning more about the Chaikin small-cap strategy can register for the Tuesday, June 6 webcast here.