The result of OUSM index change “is the new FTSE USA Small Cap ex Real Estate 2Qual/Vol/Yield 3% Capped Factor Index—it excludes real estate investment trusts (REITs), which had been a 21% allocation,” said FTSE Russell. “This change removes REITs and reduces the number of constituent holdings from 310 to 224, increasing the weight of other growth industries in the index such as Health Care, Financials and Technology.”
REITs are historically inversely correlated to rising Treasury yields, indicating OUSM could benefit from reduced exposure to the asset class as borrowing costs increase.
“Speaking with our investors and observing the direction of US equity markets, we became concerned about the impact of REITs in the O’Shares FTSE Russell US Small Cap Quality Dividend ETF,” said O’Shares founder Kevin O’Leary. “A combination of rising interest rates and slowing economic growth has impacted this area and we thought the ETF could benefit from an underlying index that was free of this asset class and more diversified in other sectors.”
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