As smart beta ETF interest continues to grow, more investors are asking questions about how to incorporate these new strategies into a diversified portfolio.
On April 17, ETF Trends and ETFdb.com will host the annual 2019 ETF Virtual Summit where the ETF industry will come together for a one-day online conference that’s complimentary for financial advisors to attend.
At this year’s Summit, backed by marquee sponsor Victory Capital Management, there will be five cutting edge virtual panels that will address some of the biggest trends and opportunities in the markets today. Leading ETF industry experts and thought leaders will serve as panelists to offer their expert opinion and analysis on the biggest challenges and opportunities for 2019, the best strategies for today’s economy and market, and out of the box investing ideas for diversification
For example, on the Smart Beta and Factor Strategies for a Late Stage Market Cycle panel, Mannik Dhillon, President, VictoryShares and Solutions, Victory Capital; Sharon French, Head of Beta Solutions, OppenheimerFunds; and Alex Piré, Head of Client Portfolio Management, Seeyond; will share their knowledge on the smart beta index-based vehicle, what’s driving smart beta growth and demand and how to best implement smart beta ETFs in a portfolio. Most importantly, the panel will debate what key factor strategies are important today.
At Victory Capital, investors may find multi-factor, smart beta strategies from the money manager’s suite of VictoryShares ETFs that focus on an enhanced volatility weighted indexing methodology.
For instance, the VictoryShares US 500 Enhanced Volatility Wtd ETF (CFO), VictoryShares US EQ Income Enhanced Volatility Wtd ETF (CDC) and VictoryShares US 500 Volatility Wtd ETF (CFA) start with the broad market and screens for companies with four quarters of positive earnings. Those stocks are then weighted based on their standard deviation over the past 180 trading days. Stocks with lower volatility are given higher weightings and stocks with greater volatility are given lower weightings. Ultimately, all securities that pass the earnings criteria are present, just at different weights.
The VictoryShares volatility weighted approach should not be confused with low-vol strategies, which are designed to capture excess returns to stocks with lower-than-average volatility, beta, and/or idiosyncratic risk.
While low-vol ETFs may only hold companies that tend to exhibit smaller swings using the factor as a selection, the VictoryShares suite starts with the broad market and screens for companies with four quarters of positive earnings. Those stocks are then weighted based on their standard deviation over the past 180 trading days.
Stocks with lower volatility are given higher weightings and stocks with greater volatility are given lower weightings. Ultimately, all securities that pass the earnings criteria are present, just at different weights. The weightings are based on volatility, so you end up with a more balanced and risk-aware approach to investing in the broad market.