As investors look to smart beta strategies to fill out a diversified portfolio, many are considering a multi-factor ETF that could address the shortcomings or cyclical nature of specific factor tilts and potentially better diversify a portfolio over the long haul.
“The challenge with smart beta is that many of those strategist focus on just one factor,” Simeon Hyman, Head of Investment Strategy at ProShares, said at the recent Morningstar ETF Conference. “If you pick one factor – maybe it’s value or go momentum, there’s cyclicality there. Sometimes, you’re right and sometimes you’re wrong. Our approach is a different take.”
For instance, the ProShares Large Cap Core Plus (NYSEArca: CSM), which overweights attractive stocks while taking a short position in unfavorable stocks, may be seen as a type of smart beta, long-short strategy.
CSM starts off with the company stocks of 500 leading large-cap U.S. companies, which are then scored based on the expected outlook for each stock using the 10 equal-weighted screens, including historical growth, expected growth, profit trends, accelerating sales, small size, price reversal, price momentum, earnings momentum, relative value and traditional value.