The Knowledge Leaders Developed World ETF (NYSEArca: KLDW), which debuted just over two years ago, is the latest ETF to top $100 million in assets under management. KLDW tracks international developed markets and is the first exchange traded fund based on the so-called Knowledge Effect.
The index-based Knowledge Leaders ETFs select companies based on the innovation process and other criteria, including characteristics like intangible property as a percentage of assets, intangible investments as percentage of sales, gross margins, financial leverage, net debt as percentage of capital, operating cash flow margin, free cash flow margin and return on invested capital.
Due to its quality control, KLDW also exhibits a greater Sharpe ratio than the Morningstar category average, or a greater risk-adjusted return as the smart beta ETF provides improved diversification benefits, lower drawdowns and enhanced upside potential.
To be precise, KLDW had $103.4 million in assets under management as of Oct. 23rd.
“The Knowledge Leaders ETF also continued its record of outperformance since inception, illustrating the tendency of Knowledge Leaders to deliver excess returns. Since inception, KLDW has outperformed the MSCI World Index by 2.81% and the Morningstar World Large Stock category average by 3.44% (NAV, annualized, as of 9/30/17),” according to a statement from Knowledge Leaders Capital.
Related: Smart Beta Investing: Right Time to Confirm Quality
KLDW holds nearly 340 stocks, none of which command a weight in excess of 0.3%. Technology is the ETF’s largest sector weight at 21% followed by consumer discretionary and industrials, each at 19%. Healthcare and materials stocks combine for 28% of KLDW’s weight.
“In addition, KLDW delivered greater total return and alpha than all five of the top benchmark indexes tracked by the largest international core equity ETFs over 2 years, as of 9/30/17. These included the FTSE Developed Index, the FTSE Developed ex-US All Cap Index, the MSCI World Index, the MSCI All Country World Index, and the MSCI EAFE Index,” according to Knowledge Leaders.
Well-known holdings in KLDW include Apple Inc. (NASDAQ: AAPL), Facebook Inc. (NASDAQ: FB) and Intel Corp. (NASDAQ: INTC).
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Tom Lydon’s clients own shares of Apple and Facebook.