A Successful Smart Beta ETF That Looks to Mega-Cap Strategy

Every year, hundreds of new exchange traded funds come to market. Some take awhile to catch on with investors. Others never gain traction while some are fortunate enough to be successful right off the bat. Put the Principal U.S. Mega-Cap Multi-Factor Index ETF (NasdaqGM: USMC), which debuted in October, in the immediately successful category.

The new U.S. Mega-Cap Multi-Factor Index ETF tries to reflect the performance of the Nasdaq U.S. Mega Cap Select Leaders Index, which is comprised of companies with the largest market capitalization taken from the Nasdaq U.S. 500 Large Cap Index and screened based on a quantitative model. USMC is a multi-factor fund, an increasingly popular strategy within the broader smart beta universe.

“You’re going to be hearing a lot more about multi-factor ETFs in the coming years as a potential bridge between passive indexes and true active management,” according to ETF Daily News. “The basis behind this strategy is to score and rank a universe of stocks based on numerous criteria such as quality, value, momentum or volatility.  The index will then continually evaluate and rebalance its holdings based on the changing landscape of stock fundamentals and performance.”

USMC’s strategy immediately proved appealing to investors.

“USMC which debuted in October and has been seeded with over $500 million of investor capital.  USMC charges an extremely reasonable 0.12% expense ratio and is geared towards identifying a narrow universe of mega-cap stocks,” reports ETF Daily News.