As the financial industry comes out with new and innovative ways for investors to access the markets, many will have to reconsider the way they gain market exposure. For example, the John Hancock Multifactor Mid Cap ETF (NYSEArca: JHMM), which tracks a factor-based index developed by Dimensional Fund Advisors, follows a rules-based selection process that is seen as a multi-factor approach, combining a number of factors in a single portfolio.
For instance, securities are adjusted by relative price and profitability. The underlying index may overweight stocks with lower relative prices and underweight names with higher relative prices. The index can also adjust for profitability by overweighting stocks with higher profitability and underweighting those with lower profitability.
JHMM’s top sector weights include information technology 17.9%, industrials 16.9%, financials 15.8%, consumer discretionary 13.0% and health care 9.4%. In comparison, the benchmark S&P MidCap 400 Index is more overweight financials, real estate and materials when compared to the smart beta JHMM portfolio.
For more information on middle capitalization stocks, visit our mid-caps category.