The advantages of smart beta strategies are not limited to large-cap stocks. There are scores of smart beta ETFs offering investors exposure to smaller companies, including the Xtrackers Russell 2000 Comprehensive Factor ETF (NYSEARCA: DESC).
In the ongoing struggle to efficiently access markets, more investors have turned to factor-based exchange traded fund strategies in an attempt to outperform broad market indices and better manage risks.
DESC tracks the Russell 2000 Comprehensive Factor Index. That benchmark “is designed to provide transparent, cost-efficient exposure to small-cap domestic equities based on five factors – Quality, Value, Momentum, Low Volatility and Size,” according to Deutsche Asset Management.
Domestic small-cap stocks as measured by the Russell 2000 Index have kept up with the U.S. large-cap segment as measured by the Russell 1000 Index year-to-date and even pulled ahead over the past month and so far into March.
A Multi-Factor Approach With DESC
DESC focuses on multiple investment, a strategy that eases investors’ burden of having to determine when specific factors are in and out favor.
Valuing high quality value is particularly important as bull markets enter their waning stages, as some market observers believe the current bull market is doing. In the early stages of bull markets, lower quality companies see their shares soar. However, as the bull matures, investors often exhibit a preference for higher quality fare with more compelling valuations.