Goldman Sachs Asset Management expanded upon its line of ActiveBeta suite of smart beta exchange traded funds with the addition of a small-capitalization U.S. equity option to help investors better gain exposure to the various market segments.
On Thursday, Goldman Sachs launched the Goldman Sachs ActiveBeta U.S. Small Cap Equity ETF (NYSEArca: GSSC). GSSC has a 0.20% expense ratio.
“Over the last two years, we have focused on building a suite of innovative, low-cost ETFs that allow investors to access key markets while harnessing the time-tested benefits of a factor-diversified approach,” Michael Crinieri, GSAM’s Global Head of ETF Strategy, said in a note. “After applying our ActiveBeta approach to large cap equities in the U.S. as well as in Emerging Markets, Developed International Equities, Europe and Japan, we are thrilled to now apply it to a market as dynamic and diverse as U.S. small cap equities.”
The ActiveBeta U.S. Small Cap Equity ETF tries to reflect the performance of the Goldman Sachs ActiveBeta Small Cap Equity Index, which screens for small capitalization U.S. issuers based on factors like value, momentum, quality and low volatility.
The value factor refers to stocks from companies that may be undervalued by the rest of the market. This can help investors gain exposure to high potential stocks others may have overlooked.
The momentum factor screens for stocks that have recently performed well and may exhibit some persistence in their outperformance. This allows investors to participate in market trends.
The quality factor follows identifies stocks from companies that have efficiently generated profits over time. This allows investors to gain exposure to companies with strong fundamentals and the potential for consistent returns.
Lastly, the low volatility factor looks for stocks from companies that are likely to avoid extreme swings up and down in price.
The smart beta ETF screens constituents taken from the Russell 2000 based on value, momentum, quality and low volatility and are assigned a so-called factor score based on the specified measurements. Those with a high factor score are given an overweight position in the rules-based index relative to the Russell 2000.
“GSSC is a result of continued investor demand for products that offer a multi-factor investment approach, providing exposure to small cap equities by leveraging our quantitative investment expertise,” Gary Chropuvka, Head of Customized Beta Strategies within the Quantitative Investment Strategies team, said in a note.
For more information on new fund products, visit our new ETFs category.