This Week's ETF Launches: ETF Launched With Market Cap Weighting Done in Reverse

Here are this week’s new launches:

For a list of all new ETF launches, take a look at our ETF Launch Center.

There are countless funds that use a market-cap weighting strategy, but only one that flips market-cap weighting upside-down. The Reverse Cap Weighted U.S. Large Cap ETF (RVRS ) launches this week with the goal of giving the greatest weight to the smallest companies within the S&P 500. This strategy makes it look more like a mid-cap fund, with higher risk than a traditional S&P 500 fund. While Apple (AAPL) carries roughly a 4% weighting in S&P 500 index funds, this fund’s top holding is Patterson Companies (PDCO) at just 0.9%.

Deutsche Asset Management takes a pair of two-year-old funds and alters their investment focus this week. The Xtrackers MSCI Italy Hedged Equity ETF (DBIT C) will change to the Xtrackers Germany Equity ETF (GRMY B) while the Xtrackers MSCI Southern Europe Hedged Equity ETF (DBSE B) becomes the Xtrackers Eurozone Equity ETF (EURZ B). Both of the new funds come with much lower fees, with each dropping from 0.45% to 0.15%.

BlackRock already manages the largest junk bond ETF, the iShares iBoxx $ High Yield Corporate Bond ETF (HYG B+). This week, it adds a second junk bond fund, the iShares Broad USD High Yield Corporate Bond ETF (USHY A), to its lineup. What’s the difference between the two? USHY places a lower cap on the maximum that can be invested in any one security. A security can be as much as 2% of assets in USHY, whereas the cap is 3% in HYG. USHY’s expense ratio of 0.22% is less than half that of the HYG.

For a complete listing of all iShares ETFs, click here.

Inspire Investing has brought three “biblically responsible” ETFs to market this year, and now adds a fourth to the lineup with the launch of the Inspire 100 ETF (BIBL B). The fund’s methodology looks for companies with market caps of $20 billion that have high Inspire Impact Scores. The top 100 companies make it into the index, which then gets market cap–weighted.

Victory Capital manages just over a dozen different ETFs, and largely specializes in volatility-weighted strategies. The VictoryShares Emerging Markets High Dividend Volatility Weighted ETF (CEY B+) is the latest addition to the lineup that looks to pair managed volatility with high dividend yields. The fund starts with the 500-name CEMP Emerging Markets 500 Volatility Index and pulls out the 100 highest-yielding names. It includes stocks with at least four consecutive quarters of positive earnings and weights stocks based on their daily standard deviation of returns.

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While there are dozens of funds dedicated to socially responsible investing, very few of them are in the fixed-income space. Sage Advisory enters this tiny arena with the debut of the Sage ESG Intermediate Credit ETF (GUDB B-). The fund starts by looking at a fairly straightforward universe of investment-grade intermediate-term credit bonds, and then layers on several environmental, social and governance screens. It eliminates any companies which receive a high Controversy Score based on news, event or incidents.

ETF marketplace newcomer FormulaFolios adds two more actively managed funds to its lineup to go with the pair of funds launched earlier this year. The FormulaFolios Smart Growth ETF (FFSG B-) will keep half of its assets in a basket of growth-oriented ETFs, while the other half will be invested in some combination of equities and cash based on internal models that gauge market sentiment. The FormulaFolios Tactical Growth ETF (FFTG C+) uses a model to assess the price momentum in five major asset classes – domestic equities, foreign equities, real estate, gold and bonds – and invests in low-cost ETFs representing the three highest-ranking classes.

Aptus Capital Advisors is a relatively small player in the ETF space, but hopes to grow bigger with the debut of the Aptus Fortified Value ETF (FTVA B-). The fund takes a smart beta approach by focusing on value and quality factors. It looks for characteristics such as strong free cash flows, high returns on invested capital and attractive valuations.

This week’s roster of new ETFs is an incredibly diverse offering something for just about everyone. Six of the 10 new funds debut with expense ratios of 0.35% or less, an acknowledgement that funds with lower expense ratios tend to draw better net flows. The Reverse Cap Weighted U.S. Large Cap ETF may be the most unique new offering, but it likely won’t get a chance to demonstrate its value until the current rally in large caps begins to wane.

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