DWS Investments launched a quality-focused ETF on Thursday that seeks out high quality companies that are not overly priced to help investors gain exposure to potential value plays in the market.
The Xtrackers Russell 1000 US QARP ETF (NYSEArca: QARP) has a 0.19% expense ratio.
The Xtrackers Russell 1000 US QARP ETF will try to reflect the performance of the Russell 1000 2Qual/Val 5% Capped Factor Index, which is comprised of large-cap equity names selected based on quality and value factors, according to a prospectus sheet.
The smart beta ETF tries to identify companies that have strong quality scores relative to their peers while also looking at the value scores of the securities to avoid companies that are potentially over-priced. The quality focus also seeks to avoid so-called value traps, or companies with favorable valuation metrics as they approach bankruptcy, that a pure value exposure would likely fall into.
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The quality factor is calculated from a company’s leverage and profitability and identifies stocks that are characterized by low debt, stable earnings growth, and other “quality” metrics, with the expectation that these will provide the possibility of excess returns.
How Value Factor is Calculated
The value factor is based on a company’s valuation ratios and identifies stocks that have low prices relative to their fundamental value and that provide the possibility of excess returns.