John Hancock has completed its core multi-factor ETFs suite, adding on a small-cap option to its standing large- and mid-cap offerings.
John Hancock recently launched the John Hancock Multifactor Small Cap ETF (NYSEArca: JHSC), which has a 0.50% expense ratio.
Similar to its large- and mid-cap multifactor ETFs, the Multifactor Small Cap ETF will try to reflect the performance of the John Hancock Dimensional Small Cap Index, which was developed in concert with Dimensional Fund Advisors and focuses on companies whose market capitalization are smaller than the 750th largest U.S. compnay but excluding the smallest 4% of U.S. companies.
The smart-beta ETFs follow a rules-based selection process that is seen as a multi-factor approach, combining a number of factors in a single portfolio. Securities are adjusted by relative price and profitability. The underlying indices may overweight stocks with lower relative prices and underweight names with higher relative prices. The indices can also adjust for profitability by overweighting stocks with higher profitability and underweighting those with lower profitability.
Related: Constructing a Portfolio with Multi-Factor, Smart Beta ETFs
The underlying indices also implement market-capitalization adjustments where they increase the weights of smaller companies within the eligible universe and decrease the weights of larger names. The weighting methodology help the ETFs follow a more equal-weight tilt with greater exposure to smaller companies than traditional market-cap weighted index funds in an attempt to capture the size premium and limit risks associated with high-flying, largeer stocks that may be overbought in an ongoing bull market rally.
Top sector weights include financials 17.0%, information technology 16.1%, industrials 14.6%, consumer discretionary 13.6% and real estate 11.5%. Top component holdings include Curtiss Wright 0.5%, Aspen Technology 0.4%, Emcor Group 0.4%, Idacorp 0.4% and Neurocrine Biosciences 0.4%.
The new JHSC will fill the gap left by the John Hancock Multifactor Large Cap ETF (NYSEArca: JHML) and John Hancock Multifactor Mid Cap ETF (NYSEArca: JHMM).
For more information on new fund products, visit our new ETFs category.