Russell ETFs Debut

by on May 19, 2011 | ETFs Mentioned:

Russell, the firm behind many of the indexes underlying popular equity exchange-traded products, has made its long awaited entrance into the ETF industry as a product sponsor. Earlier this year, Russell acquired Reno-based U.S. One, and subsequently renamed the One Fund (ONEF) to the Russell Equity ETF. Now the firm is rolling out a suite of indexed products to complement the actively-managed ONEF. The six products debuting on Thursday are part of the Russell Investment Discipline ETFs suite, designed to offer exposure to various investment disciplines commonly used by professional investment managers within the exchange-traded structure: 

  • Growth At A Reasonable Price ETF (GRPC): Linked to the Russell U.S. Large Cap Growth at a Reasonable Price Index, this fund will seek to replicate the GARP strategy that has long been popular among many money managers and individual investors. The underlying strategy is relatively simple: identify stable companies that are moderately priced based on their long term forecasted earnings growth relative to their price-to-earnings ratio.
  • Equity Income ETF (EQIN): This ETF is the latest addition to the industry that seeks to deliver an attractive current return profile by focusing on stocks of companies that demonstrate the ability to pay a stable dividend. From the Russell 1000, the underlying index includes companies that are expected to pay a dividend based on consensus one year dividend forecasts or have paid a dividend in the past year.
  • Low P/E (LWPE): This ETF offers access to a strategy popular among value investors, seeking to identify large cap U.S. stocks that are trading at lower multiples relative to their historical levels or their sector peers. Russell 1000 companies are screened by various metrics, including one year forecasted earnings, price to trailing earnings, and price to cash flow multiples to select stocks that are attractively priced [Low PE Ratio ETFs].
  • Aggressive Growth ETF (AGRG): This ETF will seek to replicate an index comprised of companies with near term forecasted earnings that are expected to increase at a faster rate than those of the average company’s earnings. Companies with low earnings retention (i.e., high dividend yields) and low price-to-book ratios are excluded to establish a growth tilt.
  • Consistent Growth ETF (CONG): This ETF implements a different approach to a growth style, focusing on companies with above average earnings expectations over a long term horizon and with consistent historical earnings growth.

Each of the products to debut on Thursday seek to replicate subsets of the Russell 1000 Index, a benchmark that includes the largest U.S.-listed companies by market capitalization. “As we celebrate our 75th year in the financial services industry in May, the launch of Russell ETFs represents another major step forward in Russell’s storied history of research and innovation,” said Andrew Doman, president and CEO of Russell. “Through a robust offering of ETFs we enhance our steadfast dedication to providing investors with a wide range of innovative products and tailored solutions to help each client reach their individual investment objectives.”

Each of the new ETFs is the first to be linked to the respective underlying indexes, though there are some more generally similar products available. JETS, for example, has offered its Contrarian Opportunities Index Fund (JCO) for a little over a year; that fund is linked to an equal-weighted index consisting of 125 stocks deemed to be consistent with a contrarian investment strategy. There are a number of funds that seek to deliver equity income, including both domestic and international options [see Dividend ETF Investing].

Russell has laid the groundwork to launch several other ETFs, including both passive and active products. The active products, many of which are structured as ETFs-of-ETFs, include the Global Opportunity ETF (ONEO), Bond ETF (ONEB), and Inflation ETF (ONEI). Other passive ETFs included low beta, high beta, low volatility, high volatility, and high momentum versions of the Russell 2000, a widely-followed small cap benchmark.

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Disclosure: No positions at time of writing.