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:
|Ticker||Name||Issuer||Launch Date||ETFdb.com Category||Expense Ratio|
|(HYGV )||FlexShares High Yield Value-Scored Bond Index Fund||FlexShares||07/17/2018||High Yield Bonds||0.37%|
|(OSCV )||Opus Small Cap Value Plus ETF||Opus Capital Management||07/18/2018||Small Cap Blend Equities||0.79%|
|(NACP )||Impact Shares NAACP Minority Empowerment ETF||Impact Shares||07/18/2018||Large Cap Growth Equities||0.76%|
|(SZNE )||Pacer CFRA-Stovall Equal Weight Seasonal Rotation ETF||Pacer Financial||07/23/2018||Large Cap Growth Equities||0.60%|
|(PEXL )||Pacer US Export Leaders ETF||Pacer Financial||07/23/2018||All Cap Equities||0.60%|
|(IEMD )||Invesco Emerging Markets Debt Defensive ETF||Invesco||07/25/2018||Emerging Markets Bonds||0.29%|
|(IEMV )||Invesco Emerging Markets Debt Value ETF||Invesco||07/25/2018||Emerging Markets Bonds||0.29%|
|(IHYD )||Invesco Corporate Income Defensive ETF||Invesco||07/25/2018||High Yield Bonds||0.23%|
|(IHYV )||Invesco Corporate Income Value ETF||Invesco||07/25/2018||High Yield Bonds||0.23%|
|(IIGV )||Invesco Investment Grade Value ETF||Invesco||07/25/2018||Corporate Bonds||0.13%|
|(IIGD )||Invesco Investment Grade Defensive ETF||Invesco||07/25/2018||Corporate Bonds||0.13%|
|(IMFP )||Invesco Multi-Factor Core Plus Fixed Income ETF||Invesco||07/25/2018||Total Bond Market||0.16%|
|(IMFC )||Invesco Multi-Factor Core Fixed Income ETF||Invesco||07/25/2018||Total Bond Market||0.12%|
|(FCTR )||First Trust Lunt U.S. Factor Rotation ETF||First Trust||07/26/2018||Large Cap Growth Equities||0.65%|
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 ). 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.
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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 ) and the Pacer U.S. Export Leaders ETF (PEXL ). 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 ) 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 ) 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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