There are now a number of smart beta ETFs in the market, allowing investors to access various targeted factors to better customize their investment portfolios.
“There’s been a lot of product proliferation in the smart beta space for good reason because they’re really outcome-oriented strategies,” David Mazza, head of ETF Investment Strategy for OppenheimerFunds, said at the Charles Schwab Impact Conference.
For example, OppenheimerFunds recently launched a handful of single factor-focused, smart beta ETFs, including the Oppenheimer Russell 1000 Momentum Factor ETF (Cboe: OMOM), Oppenheimer Russell 1000 Quality Factor ETF (Cboe: OQAL), Oppenheimer Russell 1000 Size Factor ETF (Cboe: OSIZ), Oppenheimer Russell 1000 Value Factor ETF (Cboe: OVLU), Oppenheimer Russell 1000 Low Volatility Factor ETF (Cboe: OVOL) and Oppenheimer Russell 1000 Yield Factor ETF (Cboe: OYLD).
“Let’s think about single factor,” Mazza said. “Those are precision tools that investors use to get access to value stocks or get access to small size stocks in a rules-based way.”
Mazza argued that these single-factor strategies may be a good way for investors to complement traditional core holdings in either active or passive investment portfolios. Furthermore, more sophisticated investors or financial advisors may also look at these single factors as a way to create their own targeted strategies that focus on specific factors to capitalize on market moves.
On the other hand, investors may also combine the various factors to gain an easy-to-use and quick way to access a diversified market position. This combined factor or multi-factor, smart beta approach may be a good core position for any equity portfolio. For example, the Oppenheimer Russell 1000 Dynamic Multifactor ETF (Cboe: OMFL) and Oppenheimer Russell 2000 Dynamic Multifactor ETF (Cboe: OMFS) select companies through exposure to a subset of the low volatility, momentum, quality, size and value factors. Multi-factor is a “great way to be a core holding for advisors,” Mazza added.
Investors who believe in a return to fundamentals can look to the revenue-weighted methodology, including other options like the Oppenheimer Large Cap Revenue ETF (NYSEArca: RWL), Oppenheimer Mid Cap Revenue ETF (NYSEArca: RWK) and Oppenheimer Small Cap Revenue ETF (NYSEArca: RWJ).
For more ETF-related commentary from Tom Lydon and other industry experts, visit our video category.