To capitalize on the fast-growing smart beta segment of the ETF industry, Transamerica Asset Management, Inc. last month launched DeltaShares by Transamerica with a suite of strategic beta ETFs.
The DeltaShares suite includes four ETFs designed to provide core equity strategies with an embedded risk-management feature. DeltaShares by Transamerica are the first and only suite of ETFs that track the S&P Managed Risk 2.0 Index Series so that investors can track the performance of a given segment of the equity market while seeking to control volatility.
ETF Trends recently caught up with Tom Wald, Chief Investment Officer, Transamerica Asset Management, and Vinit Srivastava, Head of Strategy and ESG Indices, S&P Dow Jones Indices, to discuss the launch.
Tom Lydon: Congratulations on the launch of DeltaShares. Tell us about this new family of ETFs?
Tom Wald: Thank you, Tom. DeltaShares is seeking to provide a real and meaningful solution to investors that, to date, we feel has yet to be provided in the ETF market. With the DeltaShares Managed Risk ETF series, we are aiming to help investors participate in the capital appreciation equities offer in rising markets in order to help meet financial goals and fund liabilities, while potentially minimizing the impact of prolonged and sustained down markets. Through seeking the optimal combination of equities, treasury bonds and cash, DeltaShares Managed Risk ETFs will strive to provide investors with the most efficient portfolio of these asset classes for a given market environment, based on current stock volatility trends. By doing so, we believe we are enhancing the traditional relationship between long-term risk and reward. What we’re doing with the DeltaShares Managed Risk ETF series is bringing institutional-quality, rules-based managed risk investing strategies to the ETF market and to everyone who utilizes ETFs, both individually and institutionally. Obviously, we are quite excited to bring the DeltaShares brand and this first Managed Risk ETF series to market.
Tom Lydon: What DeltaShares ETFs are launching first?
Tom Wald: To start, we’ve launched four Managed Risk ETFs. Three are U.S.-based large, mid and small cap stocks and one is international. They are the DeltaShares S&P 500 Managed Risk ETF (DMRL); DeltaShares S&P 400 Managed Risk ETF (DMRM); DeltaShares S&P 600 Managed Risk ETF (DMRS); and DeltaShares S&P International Managed Risk ETF (DMRI). The DeltaShares Managed Risk ETFs track a series of indices created by Vinit’s team at S&P Dow Jones Indices, the S&P Managed Risk 2.0 Indices.
Tom Lydon: What was the inspiration for DeltaShares?
Tom Wald: Transamerica had considered entering the ETF space in the past, however, we didn’t want to be just another “me too” competitor. We had established some hard criteria we thought needed to be met before entering. The first was we wanted to provide an unmet investor need that would differentiate us from existing products. The second was we wanted to partner with a highly skilled sub-adviser with a proven history and knowledge in such a strategy. The third was we also wanted to partner with an industry-leading index provider. Finally, we wanted a solution that we were seeking to be truly unique but at the same time easily understandable and appreciated by those who will ultimately own the ETFs. We believe DeltaShares met all of these criteria.
With our Managed Risk ETF series, we were seeking to build solutions that may help clients grow their assets yet systematically potentially stabilize portfolios during times of market stress. The broad vision of the DeltaShares Managed Risk ETF series as a risk-managed solution is consistent with Transamerica’s focus on creating potentially better outcomes for retirees, institutions and individual investors. DeltaShares Managed Risk ETFs employ risk management best practices honed by our partner and sub-adviser Milliman Financial Risk Management, packaged into a rules-based format by S&P Dow Jones Indices. We’re looking to deliver a sophisticated risk management approach to equity investing, however one whose overall investment premise is actually quite simple.
Tom Lydon: What is managed risk investing and what are its origins?
Tom Wald: Managed risk investing seeks to reduce overall portfolio risk when risk in the market appears as though it is increasing. Higher levels of realized volatility in equity markets have historically been associated with larger declines in stock prices. These times of higher market volatility can negatively impact investor portfolios and create stress for investors. Managed risk investing was first adopted by insurers seeking to manage liabilities, particularly life insurers for their variable annuity portfolios, but it really caught on with a broader set of investors in the wake of and during the global financial crisis.