Limit Downside Risk With a Multifactor ETF | ETF Trends

A multifactor ETF may be the solution for investors who want to maintain equity exposure but limit downside risk.

As volatility picked up in global equities in October, investors should consider November could be another volatile month on Wall Street. In the coming weeks, there are more key earnings reports as well as the highly anticipated U.S. jobs report and CPI inflation data.

See more: “Using a Multifactor ETF to Navigate Growing Volatility

A multifactor ETF that enables investors to still participate in the U.S. equity market, maintaining upside potential, while limiting downside risk is the Hartford Multifactor US Equity ETF (ROUS). ROUS can empower investors to maintain target equity exposure more comfortably during choppy markets.

During the past month, ROUS has demonstrated its ability to limit losses compared to the value benchmark. ROUS has dropped 3.6% in the past month, outperforming the Russell 1000 Value index by 175 basis points.

Year to date as of October 27, ROUS is up 0.6%, while the benchmark has declined 3.7%.

Under the Hood of Multifactor ETF ‘ROUS’

ROUS is designed to provide exposure to the U.S. equity market with potentially less volatility than traditional cap-weighted indexes. The multifactor ETF targets certain desired return-enhancing factors and reduces exposure to unrewarded risk exposures.

The fund seeks to outperform traditional cap-weighted indexes and reduce volatility by 15% over a full market cycle.

ROUS offers diversification benefits compared to a cap-weighted benchmark. The multifactor ETF reduces concentration risk at the sector, market cap, and individual holding levels.

Significant idiosyncratic company risk is introduced to funds overly concentrated at the company level. Traditional cap-weighted indexes have an overrepresentation of mega-caps while under-representing large-caps deeper within the universe. At the sector level, bubble events can enhance exposure at inopportune times.

ROUS charges just 19 basis points, making it a cost-efficient offering suitable to be a core portfolio allocation.

For more news, information, and analysis, visit the Multifactor Channel

Investing involves risk, including the possible loss of principal.

This article was prepared as part of Hartford Funds paid sponsorship with VettaFi. Hartford Funds is not affiliated with VettaFi and was not involved in drafting this article. The opinions and forecasts expressed are solely those of VettaFi. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, a recommendation for any product or as investment advice.