IndexIQ has followed up on its popular IQ Chaikin U.S. Small Cap ETF (NasdaqGM: CSML) with the launch of large-cap exchange traded fund tracking the same smart beta Chaikin Power Gauge strategy.
On Wednesday, IndexIQ rolled out the IQ Chaikin U.S. Large Cap ETF (NasdaqGM: CLRG), which has a 0.25% expense ratio.
Salvatore Bruno, Chief Investment Officer with IndexIQ, explained that the idea of a large-cap version of CSML came about as more financial advisors asked about the strategy behind the small-cap ETF and wondered if the same Chaikin Power Gauge methodology would translate into a large-cap ETF.
“The addition of CLRG to our product suite provides investors and advisors with a powerful tool as they contemplate their domestic equity holdings,” Bruno said in a note. “Having the ability to add domestic large cap exposure that combines a high conviction, multi-factor approach with the lower costs, transparency and tax efficiency of ETFs is a great opportunity for advisors to help build better portfolios for their clients.”
CLRG is the second ETF designed to leverage the Chaikin Power Gauge (CPG), a proprietary quantitative stock rating model developed by Marc Chaikin, an investment strategist with 50 years of market experience.
“The Chaikin Power Gauge has proven the test of time and extends across all market caps,” Marc Chaikin, Founder and CEO of Chaikin Analytics, told ETF Trends in a call.
The underlying index takes 45 to 65 components from the market cap-weighted Nasdaq US 300 and incorporates the so-called Chaikin Power Gauge that combines four primary factors, including value, growth, technical and sentiment.
The value factor includes screens like LT debt to equity ratio, price to book value, return on equity, price to sales ratio and free cash flow. Technical factors cover price trend, price trend rate of change, relative strength vs. market and volume trend. Growth factors include earnings growth, earnings surprise, earnings trend, projected P/E ratio and earnings consistency. Lastly, the sentiment factor screens for earnings estimate trend, short interest, insider activity, analyst ratings and industry relative strength.
“Our entire suite of NASDAQ Chaikin indices is built on a proprietary research process and provides the basis for differentiated exposures, a task to which I’ve dedicated my career,” Chaikin said.
The Chaikain Power Gauge helps merge the best of active and passive investment methodologies. The smart beta methodology incorporates many investment styles traditionally associated with active management but brings the strategy to market through a rules-based, passive index ETF.
“Looking at the elements in the power gauge, it really bridges the gap between active and passive,” Carlton Neel, Chief Operating Officer at Chaikin Analytics, told ETF Trends. “The power gauge does a good job of selecting securities with outperformance.”
For more information on new fund products, visit our new ETFs category.