iShares Drafts Momentum-Focused ETF

January 25, 2013

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iShares, the world’s largest ETF provider, is looking to expand its footprint in the market with plans for another factor-based equities ETF that hones in on stock-price momentum as a mechanism for security selection.

In paperwork it filed with regulators recently, the company detailed the iShares MSCI USA Momentum Index Fund, which would track an MSCI benchmark that picks securities from the market-capitalization-weighted MSCI USA Index, with a focus on those that show higher momentum.

That momentum metric is measured by a stock’s price movement over the previous six to 12 months based on daily returns, the filing said. Stocks are then assigned a momentum score, which is then multiplied by a company’s free-float market capitalization to determine the weighting each security is assigned in the portfolio.

The ETF will comprise roughly 100 to 150 stocks, with consumer discretionary, financials and information technology being the main sectors represented in the mix.

The planned fund is part of a relatively new trend in the ETF market 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, momentum.

iShares’ latest filing comes just days after the company submitted similar paperwork detailing plans for a risk-based ETF and a value-based ETF that also riff off of the MSCI USA Index.

The firm already offers straight-up exposure to the broad market-capitalization-weighted benchmark in its iShares MSCI USA Index Fund (NYSEArca: EUSA), which has gathered some $157.5 million since it came to market in mid-2010.

EUSA has a 0.15 percent expense ratio, but the filing didn’t disclose planned fees or a ticker for the new ETF.



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