Compass EMP, a recent newcomer to the ETF space, on Friday is launching a “smart beta” fund that targets small-cap stocks that have low-volatility profiles. The fund, the company’s fourth, is based on an index the Brentwood, Tenn.-based firm created itself.
The Compass EMP U.S. Discovery 500 Enhanced Volatility Weighted Fund (CSF) will focus on small-cap companies with consistent positive earnings (at least for its four most recent quarters) and weighted based on the volatility of each stock, according to a regulatory filing. Stocks with lower volatility receive a higher weighting, and stocks with higher volatility receive a lower weighting.
The self-indexing aspect of the ETF as well as its volatility-targeting index place Compass EMP at the center of two popular trends coursing through the rapidly growing ETF industry. Issuers are moving to self-index funds to bring their funds to market more cost efficiently, and they continue to tap into investors’ appetite for funds outside of traditional market-cap-weighted offerings.
The fund sports an annual expense ratio of 0.68 percent, or $68 for every $10,000 invested. Its launch was made public via a Nasdaq electronic communique.
Compass earlier this month launched its first three funds—all volatility-targeting securities in the “smart beta” category.
Those funds, which came to market on July 2, and their expense ratios are as follows:
- Compass EMP U.S. EQ Income 100 Enhanced Volatility Weighted Fund (CDC), 0.68 percent, or $68 for every $10,000 invested
- Compass EMP U.S. 500 Volatility Weighted Index ETF (CFA), 0.58 percent
- Compass EMP U.S. 500 Enhanced Volatility Weighted Index ETF (CFO), 0.68 percent
Cambria’s Meb Faber last month cut ties with AdvisorShares, leaving his post as subadvisor to GTAA to focus on his own growing lineup of ETFs under the Cambria umbrella. In fact, next on Faber’s list is a planned global equities fund that would go head-to-head with GTAA itself.
Faber’s planned Cambria Global Momentum ETF (GMOM), like AdvisorShares’ GTAA, is an actively managed tactical ETF that’s a “more aggressive” version of GTAA, according to a spokesperson for Cambria. The official said the fund remains in registration with the SEC, which limits the company’s ability to comment on the fund.
Mark Yusko, from Morgan Creek Capital, will take the subadvisory role in GTAA. He is known for his expertise with endowments.