iShares Plans Risk, Value MSCI-Linked ETFs

By
Cinthia Murphy
January 15, 2013
Share:

Related ETFs

Ticker Fund name
EUSAiShares MSCI USA
Related ETF Lists
Total Market ETFs

iShares looks to add two factor-based ETFs to its product lineup.

iShares, the world’s largest ETF company, is looking to market two U.S. equities ETFs linked to MSCI benchmarks that weight securities based on risk and value measures.

In two separate filings, the company detailed plans for a risk-weighted and a value-weighted ETF that track MSCI benchmarks constructed around the broad, market-capitalization-weighted MSCI USA Index, which comprises securities in the top 85 percentile by market cap.

Plans for such funds is part of a relatively new trend in the worlds of ETFs and indexing centering on “smart beta” or so-called strategy indexes that attempt to carve up the investment universe on the basis of specific factors—in this case, risk and value.

The iShares MSCI USA Risk Weighted Index Fund tracks the MSCI USA Risk Weighted Index, which “reweights” the securities comprised in the broader MSCI USA Index in an effort to have those with the lowest risk profiles represent a larger percentage of the mix.

Risk is measured as historical variance over a three-year period of weekly return data, with those with the lowest variance ranking highest in the portfolio, the filing said. In the end, the methodology is designed to show lower realized volatility relative to the parent MSCI index.

The iShares MSCI USA Value Weighted Index Fund applies the same reweighting concept to the broader MSCI USA Index, but hones in on stocks that show lower market value relative to “certain accounting measures of value,” such as book value, three-year moving average of sales, earnings and cash earnings, the second filing said.

While energy, financials and information technology are the main sectors comprised the value-weighted portfolio, consumer discretionary and staples, financials and utilities companies represent the majority of the risk-weighted ETF.

Both funds would join the iShares MSCI USA Index Fund (NYSEArca: EUSA), which has gathered $155 million since it came to market in mid-2010. EUSA has an annual expense ratio of 0.15 percent.

Neither filing disclosed planned tickers, fees or the exchange where the ETFs will be listed.

 

ETF.COM CHANNELS

Want to learn more about smart-beta ETFs? Check out our smart-beta guide, essentials library and ETF screener!

ETF DAILY DATA

Vanguard's all-market fund 'VTI' led inflows on Thursday, April 23, as total U.S.-listed ETF assets reached a record of $2.163 trillion.

'VTI,' 'VB' and 'VGK' paced Vanguard's issuer-leading inflows on Thursday, April 23, as total U.S.-listed ETF assets rose to a record $2.163 trillion.

ETF.COM ANALYST BLOGS

By Dave Nadig

Buying and selling ETFs wisely means understanding the difference between being a buyer and a seller.

By Olly Ludwig

Saving the world as an eco-conscious investor is a tough row to hoe, but ETFs make it a bit easier.

By Olly Ludwig

If you’re puzzled by Israel’s relatively strong stock market performance, don’t forget you’re taking measure of a developed country.

By Olly Ludwig

If only Fidelity could speak freely about all the positive things it does for investors.