Ten funds are launching today, with five alone from J.P. Morgan. The remainder are issued by Vanguard, BlackRock’s iShares, John Hancock and Virtus.
J.P. Morgan Debuts Single-Factor Family
Today J.P. Morgan is rolling out five competitively priced single-factor ETFs. The new funds track indexes derived from the Russell 1000 Index.
The funds all list on the NYSE Arca exchange and come with expense ratios of 0.12%. The ETFs’ names and their tickers are as follows:
- JPMorgan U.S. Dividend ETF (JDIV)
- JPMorgan U.S. Minimum Volatility ETF (JMIN)
- JPMorgan U.S. Momentum Factor ETF (JMOM)
- JPMorgan U.S. Quality Factor ETF (JQUA)
- JPMorgan U.S. Value Factor ETF (JVAL)
iShares has a similar family of four single-factor ETFs covering minimum volatility, momentum, quality and value. Those funds come with an expense ratio of 0.15%. However, the iShares Select Dividend ETF (DVY) is not part of that family, and comes with an expense ratio of 0.39%.
Although the J.P. Morgan ETFs are not the cheapest funds associated with their respective strategies, they are among the cheapest. But perhaps more notably, the funds represent the cheapest and most complete family of single-factor ETFs available.
iShares Launches Dividend & Buybacks Fund
BlackRock’s iShares unit is debuting an income-oriented fund that will combine exposure to U.S.-listed firms that issue distributions to shareholders. The iShares U.S. Dividend and Buyback ETF (DIVB) tracks an index from Morningstar and comes with an expense ratio of 0.25%.
DIVB lists on Cboe Global Markets, parent company of ETF.com.
Rob Nestor, head of iShares Smart Beta at BlackRock, says that dividends and buybacks have long been recognized in academic literature as important sources of return.
“Investors still have a great interest in that income stream, but most dividend streams tend to bias to certain sectors and categories,” he noted. “When you combine dividends with buybacks, that tends to balance out the exposures to the sector base.”
Buybacks are more prominent, he points out, in sectors that don’t tend to pay out high dividends. He adds that the rate of buybacks has slowed from their high in recent years, but that far more companies are doing them.
“The global thirst for yield is not abating,” Nestor said.
The fund’s benchmark targets the U.S. companies with the largest dividend and share buyback programs in terms of dollar value from any size segment. The prospectus notes that the components represent 90% of the combined dividend and buyback distributions from the benchmark’s parent index.
The document further points out that the fund’s index was heavily weighted toward the financials and information technology sectors as of Sept. 30.
A comparable fund, the Cambria Shareholder Yield ETF (SYLD), targets companies with strong cash flow that are involved in the issuance of dividends, share buybacks and paying down their net debt. It has $128 million in assets under management and comes with an expense ratio of 0.59%.
Virtus Unveils EM Strategy
Virtus is launching its 12th fund today with the rollout of the Virtus Glovista Emerging Markets ETF (EMEM). The fund tracks an index that is similar to an active strategy that global macro firm Glovista Investments offers to its institutional clients.
The fund comes with an expense ratio of 0.68% and lists on the NYSE Arca.
“We collaborated with Glovista to systematize their flagship strategy to introduce a tax-efficient and passive vehicle to retail investors,” said William Smalley, Virtus’ head of product strategy and management.
“This index reflects their global macro investment philosophy in that it seeks to identify emerging market stocks or opportunities in emerging market equities at the country level. It also seeks to limit downside by avoiding stocks in the weakest emerging market countries,” he added.
EMEM’s underlying index is updated on a monthly basis, during which it evaluates 15 of the largest and most liquid emerging markets, including China, Taiwan, South Korea, India, Malaysia, Indonesia, Thailand, Philippines, Russia, South Africa, Poland, Turkey, Brazil, Mexico and Chile.
From there, it selects 10 markets and invests in the 50 largest securities from each of those markets as long as they have $750 million in market capitalization and an average three-month daily trading volume of $500,000.
The methodology relies on three selection models to determine which markets it will target each month. The models, respectively, are based on macroeconomic trends, bottom-up company-specific dynamics and relative price momentum dynamics, the prospectus says.
“It’s not assessing opportunities at the single-stock level but rather at the country level, and then passively allocating to large and liquid stocks in each of those countries,” Smalley said of the strategy.
“The vast majority of this fund’s peers will have a beta objective. We think even though it is index-based, this can offer an alpha experience over the long run with passive implementation in a tax-efficient package. We think we’re kind of combining the best of both worlds here,” he noted.
As of Sept. 30, the index included 602 components, according to the document.
John Hancock Rounds Out Multifactor Suite
Finally, John Hancock is rounding out its family of multifactor ETFs with the launch of the John Hancock Multifactor Small Cap ETF (JHSC). The fund comes with an expense ratio of 0.50% and lists on the NYSE Arca.
Like the other John Hancock multifactor ETFs, JHSC tracks an index provided by Dimensional Fund Advisors. According to the prospectus, the index includes companies ranking below the 750th largest U.S.-listed company by market capitalization and excludes the smallest 4%.
Further, companies are targeted based on market-capitalization size, profitability and relative price. Individual companies see their individual weights capped at 4% of the index, the prospectus says.
JHSC’s addition to the John Hancock family of ETFs brings that total number of funds to 13.
Contact Heather Bell at [email protected]