A very forgettable March saw one exchange-traded fund (ETF) walk away from the pandemic sell-off relatively unscathed—the Invesco Russell 1000 Dynamic Multifactor ETF (BATS: OMFL). It highlighted the benefit of using a multifactor approach when markets go awry, but can it work during a recovery?
“Does the future look enough like the past that you can count on the same models to continue to work? I’m very skeptical of that,” said Dave Nadig, chief investment officer and research director for ETF Database. “I am of the opinion that we are undergoing a cataclysmic shift in the global marketplace. I’m not sure that low volatility and value investing are going to mean the same thing going forward.”
OMFL seeks to track the investment results of the Russell 1000 Invesco Dynamic Multifactor Index. This underlying index is designed to select equity securities from within the Russell 1000® Index, which measures the performance of the 1,000 largest-capitalization companies in the United States.
Through smart beta via a multifactor approach, investors get adaptable exposure with the rules-based approach in conjunction with reaping the rewards of diversification via access to a broad market index. In addition, the simplicity of buying a broad-based market index has a concentration of risk, and should another market downturn ensue.
Whether OMFL can work in today’s environment remains to be seen. As countries begin to recuperate from the shock and awe of the pandemic, the real economic ramifications could be surfacing.
As such, OMFL could still be of benefit to investors.
Features of OMFL:
- Provides access to a portfolio of U.S. large- and mid-cap stocks that score well for exposure to specific factors, including momentum, value, quality, size, and low volatility.
- Seeks to maximize exposure to these factors, which have historically driven long-term returns that outperform the broad market.
- Capitalizes on the cyclicality of factor performance by employing a dynamic overlay that looks at leading economic indicators and market sentiment to determine the current market environment and then increases exposure to the factors that fare best in that environment.
Another fund to look at for growth opportunities is the Oppenheimer Russell 2000 Dynamic Multifactor ETF (BATS: OMFS), which provides:
- Provides access to a portfolio of U.S. small-cap stocks that score well for exposure to specific factors, including momentum, value, quality, size, and low volatility.
- Seeks to maximize exposure to these factors, which have historically driven long-term returns that outperform the broad market.
- Capitalizes on the cyclicality of factor performance by employing a dynamic overlay that looks at leading economic indicators and market sentiment to determine the current market environment and then increases exposure to the factors that fare best in that environment.
For more market trends, visit ETF Trends.