Investors and advisors are turning to a rising group of alternative index-based exchange traded funds that implement factor screens to enhance returns and diminish risk associated with traditional market cap-weighted funds. As more grow acquainted with the various smart beta strategies, investors have become more discerning, comparing various factor options when selecting the right smart beta fit.
On March 14, 2018, ETF Trends will be hosting its annual Virtual Summit, an online virtual conference environment where financial advisors can learn about current ETF issues, hear from industry experts and connect with peers without the burden of cost and traveling.
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On panel titled, The Smart Beta Ecosystem: What You Need to Know, Dave Mazza, Head of Investment Marketing & Strategy for Beta Solutions at OppenheimerFunds, Mannik Dhillon, President of VictoryShares, and Salvatore Bruno, CIO and Managing Director of IndexIQ, will dive into the customized indices that make up the new breed of factor-based ETFs and delve deeper into the various factors that can help improve portfolio construction.
For example, IndexIQ recently followed up on its popular IQ Chaikin U.S. Small Cap ETF (NasdaqGM: CSML) with the launch of large-cap version tracking the same smart beta Chaikin Power Gauge strategy, the IQ Chaikin U.S. Large Cap ETF (NasdaqGM: CLRG).
The two IQ Chaikin ETFs incorporate the so-called Chaikin Power Gauge that combines four primary factors, including value, growth, technical and sentiment. The Chaikin Power Gauge rating methodology tries to provide investors a directional edge by incorporating a proven algorithm that uniquely combines fundamental data with technical factors.
Victory Capitaloffers a line of volatility weighted ETF strategies, such as the VictoryShares US 500 Enhanced Volatility Wtd ETF (CFO), that systematically shifts allocations between stocks and cash to help curb emotional decision-making or provide a systematic, disciplined approach to stocks with a built-in mechanism to shift to cash depending on market conditions.
CFO shifts from a long position to cash position depending on market swings to help investors better manage risk exposure. When the ETF is less than 100% allocated in stocks, assets are invested in cash or 30-day T-bills. The reallocation process is rules-based and determined based on month-end index values.
Additionally, Oppenheimerfunds has a suite of factor-based ETFs, including options like the Oppenheimer Russell 1000 Dynamic Multifactor ETF (Cboe: OMFL) and Oppenheimer Russell 2000 Dynamic Multifactor ETF (Cboe: OMFS), which select companies through exposure to a subset of the low volatility, momentum, quality, size and value factors. Investors may combine the various factors to gain an easy-to-use and quick way to access a diversified market position. This combined factor or multi-factor, smart beta approach may be a good core position for any equity portfolio.
As investors may notice, these types of smart beta or factor-based ETF strategies follow a predefined rules-based indexing methodology that differs greatly from traditional market-capitalization stock index funds. The smart beta strategies may also help diminish risks associated with market-cap weighting methodologies, especially in a prolonged bull market environment.
For more information on the ETF Trends Virtual Summit conference, visit our Virtual Summit page.
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