On Monday, Invesco announced that its newly launched multi-factor ETF suite that tracks small-, mid-, and large-cap S&P Indices has now crossed $1 billion in inflows, including a substantial investment from the Municipal Employees Retirement System of Michigan (MERS).
The ETFs include the Invesco S&P 500 QVM Multi-Factor ETF (QVML ), which tracks an index based on the S&P 500, the Invesco S&P MidCap 400 QVM Multi-Factor ETF (QVMM ), which tracks an index based on the S&P MidCap Index, and the Invesco SmallCap 600 QVM Multi-Factor ETF (QVMS ), which tracks an index based on the S&P SmallCap 600 Index.
“Our allocation to the new Invesco S&P QVM ETF Suite gives us flexible, cost efficient, and liquid access to Quality Value Momentum multifactor exposure across market cap tiers,” said Jeb Burns, Chief Investment Officer of MERS, in the release announcing the crossing of the $1 billion threshold.
The backing of the Invesco QVM ETF suite by MERS is indicative of a trend in both institutional investors as well as pension funds, adds John Hoffman, Head of Americas, ETFs and Indexed Strategies, at Invesco.
“The confidence from MERS in the new Invesco S&P QVM ETF Suite is reflective of not only the growing ETF usage among institutional investors, but also of pension funds’ increasing willingness to consider the lower-cost passive instruments that best meet mandates,” he said in the release. "We believe this will continue to be a trend among forward-thinking institutions who see value in rewarded factors."
A recent study by Invesco found that 81% of institutional investors surveyed and 73% of advisors looking for tools to diversify were allocating to multi-factor strategies like the Invesco QVM ETF suite.
The Invesco QVM Suite: QVML, QVMM, QVMS
QVML, QVMM, and QVMS base their security selection on various factors and pull only the top 90% performing based on a combined quality, value, and momentum (QVM) score.
The QVM score is calculated using several factors. The quality score evaluates a stock’s accrual ratios, return-on-equity, and financial leverage ratio; the value score evaluates earnings-to-price ratio, book value-to-price ratio, and sales-to-price ratio; and the momentum score evaluates risk-adjusted price performance of each stock compared to similar ones.
All scores are averaged to find the multi-factor score and those within the top 90% of each primary index are included in the appropriate Invesco QVM ETF.
QVML carries an expense ratio of 0.11%, and QVMM and QVMS both carry an expense ratio of 0.15%, making them the least expensive multi-factor ETFs in their individual categories.
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