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  1. This Week’s ETF Launches: Invesco Debuts Its Smart-Beta Fixed Income Lineup
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This Week’s ETF Launches: Invesco Debuts Its Smart-Beta Fixed Income Lineup

David DierkingAug 01, 2018
2018-08-01

Smart-beta strategies capture the ETF limelight this week with several new offerings arriving on both the equity and fixed income side.

Invesco goes all-in debuting eight new fixed income products, while other notable issuers, such as First Trust, Pacer and FlexShares, bring a variety of factor and sector-rotation strategies to the marketplace.

Here are this week’s new fund launches:

TickerNameIssuerLaunch DateETFdb.com CategoryExpense Ratio
(HYGV A-)FlexShares High Yield Value-Scored Bond Index FundFlexShares07/17/2018High Yield Bonds0.37%
(OSCV )Opus Small Cap Value Plus ETFOpus Capital Management07/18/2018Small Cap Blend Equities0.79%
(NACP B+)Impact Shares NAACP Minority Empowerment ETFImpact Shares07/18/2018Large Cap Growth Equities0.76%
(SZNE B)Pacer CFRA-Stovall Equal Weight Seasonal Rotation ETFPacer Financial07/23/2018Large Cap Growth Equities0.60%
(PEXL B-)Pacer US Export Leaders ETFPacer Financial07/23/2018All Cap Equities0.60%
(IEMD )Invesco Emerging Markets Debt Defensive ETFInvesco07/25/2018Emerging Markets Bonds0.29%
(IEMV )Invesco Emerging Markets Debt Value ETFInvesco07/25/2018Emerging Markets Bonds0.29%
(IHYD )Invesco Corporate Income Defensive ETFInvesco07/25/2018High Yield Bonds0.23%
(IHYV )Invesco Corporate Income Value ETFInvesco07/25/2018High Yield Bonds0.23%
(IIGV B+)Invesco Investment Grade Value ETFInvesco07/25/2018Corporate Bonds0.13%
(IIGD B-)Invesco Investment Grade Defensive ETFInvesco07/25/2018Corporate Bonds0.13%
(IMFP )Invesco Multi-Factor Core Plus Fixed Income ETFInvesco07/25/2018Total Bond Market0.16%
(IMFC )Invesco Multi-Factor Core Fixed Income ETFInvesco07/25/2018Total Bond Market0.12%
(FCTR B-)First Trust Lunt U.S. Factor Rotation ETFFirst Trust07/26/2018Large Cap Growth Equities0.65%


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

Invesco Builds Out Its Smart-Beta Roster

Smart-beta strategies within the fixed income space are relatively few and far between. Invesco takes a big step toward changing that as it launches its suite of factor-based bond ETFs. The three “defensive” ETFs in the lineup will target bond issues with better quality characteristics, such as higher credit ratings and shorter maturities. The three “value” ETFs will look for bonds with higher yields and higher return potential relative to their inherent risks. The multi-factor ETFs offer a focus on both quality and value across virtually all fixed income asset classes, including investment-grade, junk, government and emerging markets bonds.

An ESG ETF Focused on Minority Empowerment

Environmental, social and governance (ESG) investing gets a nod this week with the debut of the Impact Shares NAACP Minority Empowerment ETF (NACP B+). Its goal is to provide exposure to U.S. companies with strong racial and ethnic diversity policies in place, empowering employees irrespective of their race or nationality.

NACP uses data from Sustainalytics, the fund’s ESG research provider, to determine a company’s “Minority Empowerment Composite Score.” The 200 best-scoring companies qualify for inclusion, with that score and the company’s market cap determining the component’s weight in the index. Impact Shares is looking to do some additional good in its own right while managing this fund. It plans on donating all net advisory profits from its management fee to the NAACP.

For more ETF news and analysis, subscribe to our free newsletter.

Pacer Develops a Seasonal Rotation Strategy

Pacer Financial, the company behind a series of free cash flow-focused ETFs, introduces two very different products this week – the Pacer CFRA-Stovall Equal Weight Seasonal Rotation ETF (SZNE B) and the Pacer U.S. Export Leaders ETF (PEXL B-). SZNE will target sectors based on when they have historically performed better – consumer discretionary, industrials, materials and tech starting in the fall and consumer staples and healthcare starting in the spring. PEXL will start with the S&P 900 and invest in the top 100 large- and mid-cap U.S. companies with a high percentage of foreign sales and high free cash flow growth.

Opus Debuts with Small Cap ETF

Small-cap specialist Opus Capital Management launches its first ETF this week, the Opus Small Cap Value Plus ETF (OSCV ). It’s an actively-managed fund that targets small-cap, dividend-paying U.S. companies with strong growth potential, higher quality and lower valuation.

First Trust Partners with Lunt Capital for Factor Rotation ETF

The First Trust Lunt U.S. Factor Rotation ETF (FCTR B-) is a joint venture between First Trust and Lunt Capital that will use Lunt’s factor allocation methodology to invest in the sectors that present the most attractive opportunities. FCTR will look at the momentum, quality, volatility and value factors to determine the four sectors that will be targeted, each receiving 25% of the fund’s assets.

FlexShares Looks for Value in Junk Bonds

Not to be outdone, FlexShares launches its own value-based factor strategy this week. The FlexShares High Yield Value-Scored Bond Index ETF (HYGV A-) seeks to generate a higher yield than the overall high-yield bond market while maintaining a similar level of risk. To fill out the portfolio, the company generates a proprietary value score, which is determined in large part by valuation and solvency metrics.

The Bottom Line

The Minority Empowerment ETF and its charitable giving mandate might be the “feel good” story of the week, but the growth of smart-beta bond ETFs might be the bigger one. As short-term interest rates rise and the yield curve flattens, investors have shown interest in strategies that can protect against downside risk while offering the chance for above-average yields. The Seasonal Rotation ETF is an interesting idea, but its sector concentration and complete omission of the financials, energy and real estate sectors could be detrimental.

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