BlackRock released five new ETFs that select stocks by using quantitative screens.
The first set of funds, the iShares Enhanced ETFs, use BlackRock's proprietary research rather than tracking an index.
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The iShares Enhanced US Large Cap ETF (NYSEArca:IELG) and the iShares Enhanced US Small-Cap ETF (NYSEArca:IESM) use multiple factors such as quality, value, and market size to determine what stocks will be included within the portfolio. According to BlackRock, its "Enhanced ETFs" were designed in partnership with Registered Investment Advisors (RIAs) and institutional investors, specifically public pensions, to provide a broader range of solutions to help manage equity exposures and risk.
Factors are a set of investment characteristics which explain the risk and return behavior of an asset or stock. Factor investing offers an alternative approach to traditional market-capitalization investing by aiming to cut market volatility. (WATCH: How to Trade Commission Free ETFs without Getting Burned)
The other three funds launched are the iShares MSCI USA Momentum Factor ETF (NYSEArca:MTUM), iShares MSCI USA Size Factor ETF (NYSEArca:SIZE), and the iShares MSCI USA Value Factor ETF (NYSEArca:VLUE).
The iShares MSCI Factor ETFs were designed at the request of institutional investors, such as Arizona State Retirement System (ASRS), who want exposure to a specific individual factor - value, size or momentum - so they can overweight or hedge a single factor that has historically explained a significant part of companies' return and risk over the long-term.
The collaborative partnership of ASRS, BlackRock and MSCI was instrumental in developing the iShares MSCI Factor ETFs which institutional investors can use to implement risk factor investing more precisely.
"The iShares MSCI Factor ETFs compliment iShares' suite of Minimum Volatility products and the iShares Enhanced ETFs can benefit from BlackRock research, portfolio implementation, and risk management expertise for our clients," said Patrick Dunne, Head of iShares Global Markets and Investments.
He added, "The expansion of iShares Factor ETFs demonstrates how iShares has raised the bar of ETF development by working alongside clients. Increasingly we plan to develop products that are client-led to meet their most pressing portfolio challenges."The five ETFs began trading on April 18, 2013 on the NYSE Arca.
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