Principal Financial expanded its lineup of smart beta ETFs, launching two single-factor strategies to help investors focus on momentum and value.
On Thursday, Principal rolled out the Principal Contrarian Value Index ETF (NasdaqGM: PVAL) and the Principal Sustainable Momentum Index ETF (NasdaqGM: PMOM). Both PVAL and PMOM have a 0.29% expense ratio.
The Contrarian Value Index ETF will try to reflect the performance of the Nasdaq U.S. Contrarian Value Index, which includes companies taken from the Nasdaq US Large Mid Cap Index but follows a quantitative model designed to identify those that appear undervalued by the market relative to their fundamental value.
Specifically, PVAL’s underlying index will screen for book yields of the securities for the last 28 quarters where it will determine a market condition of “bear market” or “normal market.” In a bear market, securities in the top 30% by book yield are selected for the Index. In a normal market, the initial book yield rankings are adjusted using calculations related to leverage, twelve-month price volatility, and forward earnings dispersion as of the most recent quarter end; those in the top 30% based on the adjusted rankings are selected for the Index, according to a prospectus sheet.
The Sustainable Momentum Index ETF will tr to reflect the performance of the Nasdaq U.S. Sustainable Momentum Index, which uses a quantitative model to identify equity securities within the Nasdaq US Large Mid Cap Index that exhibit sustainable price momentum, based on historical stock prices over multiple periods and taking multiple market environments into consideration.
The underlying lying index will screen each security and assign a corresponding Sustainable Momentum (SUMO) Score based on intermediate factors (3, 4, 5, 6, 7, 8, 9, 10, 11 and 12 month risk-adjusted returns) and long-term factors (36, 48, and 60 month risk-adjusted returns), with volatility adjustments used to determine a composite score. Securities with SUMO scores that rank in the top 15% are included, along with securities already in the index that rank in the top 35%. Securities are weighted to give those in the higher ranking groups relatively more weight, depending upon market volatility.
For more information on new fund products, visit our new ETFs category.