BlackRock (NYSE: BLK) launched a new smart beta exchange traded fund strategy that helps focus on large U.S. companies with significant business in the domestic market, potentially limiting currency risk and other foreign market risks for U.S. large-cap investors.
The recently launched iShares Russell 1000 Pure U.S. Revenue ETF (NasdaqGM: AMCA) comes with a 0.15% expense ratio.
The Russell 1000 Pure U.S. Revenue ETF tries to reflect the performance of the Russell 1000 Pure Domestic Exposure Index, which includes companies that earn a higher percentage of their revenue through sales in the U.S., compared to other large- and mid-cap companies in the U.S. equity market.
Only those with a domestic sales ratio of 90% or greater will be included in the ETF. Domestic sales ratio is calculated as the percentage of a company’s latest reported domestic revenues compared to the company’s total revenue. If the domestic sales ratio falls below 85%, the component will be removed from the index.
“Globalization has profoundly altered the exposure of U.S. companies to offshore revenues and that is apparent in the performance of U.S. equity portfolios. In turn, iShares AMCA aims to provide investors with greater control to overweight the stocks of U.S. companies that are less dependent on overseas returns and more insulated from overseas risk,” Martin Small, Head of U.S. iShares at BlackRock, said in a note.
AMCA’s sector weights include financials 24.1%, consumer discretionary 15.4%, utilities 10.5%, health care 10.4%, real estate 9.1%, telecom 7.3%, consumer staples 6.4%, industrials 6.3%, energy 5.4%, information technology 3.0% and materials 1.8%. In contrast, the benchmark Russell 1000 Index includes a hefty weight toward technology 22%.
Related: Latest Smart Beta ETF Strategy
The new ETF’s top holdings include AT&T (NYSE: T) 3.7%, Bank of America (NYSE: BAC) 3.4% and Wells Fargo (NYSE: WFC) 3.3%. In comparison, the benchmark Russell 1000’s top holdings include Apple (NasdaqGS: AAPL), Microsoft (NasdaqGS: MSFT) and Facebook (NasdaqGS: FB).
Over the past few years, a number of technology focused mega-cap multinational U.S. companies have risen, like Apple, Google (NasdaqGS: GOOG) and Facebook, which have a large global footprint. Consequently, the welfare of the global economy plays a much larger role for these multinational companies.
For more information on new fund products, visit our new ETFs category.