BEST NEW SMART BETA OR FACTOR ETF
WINNER: iShares U.S. Small Cap Value Factor ETF (SVAL)
One thing ETF issuers hope for in an ETF launch is good timing, but you can’t really plan for news and market events. However, when timing and trends align, it’s lightning in a bottle.
The winner of 2020’s Best New Smart Beta or Factor ETF, the iShares U.S. Small Cap Value Factor ETF (SVAL), was struck by the timing lightning bolt when it launched days before Halloween. Value and small caps had been beaten-down segments of the market. Small caps felt the quick and swift impact of COVID’s lockdowns, and value has been a near-laughing-stock factor in terms of performance for the last few years.
But the market worm turned, and in a matter of weeks, the small cap revival from stimulus aid and business reopenings caught fire, as did value, which came back from the dead and has been surpassing growth for the last two quarters.
Investors noticed this well-timed solution to a market-turning problem, and SVAL has raked in more than $110 million in assets, a decent number in five months for a niche smart beta play that, a year ago, would have been scoffed at.
Tracking an equally weighted index of small cap value companies selected by multiple factors, SVAL was up roughly 25% at the end of March, riding a portfolio topped with a 44% allocation to financials. Timing, performance and assets are all coming together for SVAL early on.
BEST NEW ACTIVE ETF
WINNER: American Century Focused Dynamic Growth ETF (FDG)
In the ETF world, active management fans have traditionally been heavily outnumbered by the passive investing crowd. But in 2020, diehard believers in a manager’s secret sauce had their moment, buoyed by two separate currents in the ETF space: first, jaw-dropping performance by some active ETF managers; and second, the arrival of a brand new active ETF wrapper that promises opacity.
The active nontransparent ETFs first launched last year are still very new as products. Yet many of them are already delivering a punch, which is why the title of Best New Active ETF of the year—covering both transparent and nontransparent wrappers—is going to one of the first funds in this new segment of active ETFs: the American Century Focused Dynamic Growth ETF (FDG).
Among the first to offer lack of portfolio transparency as a feature, FDG outpaced some of the biggest traditional growth ETFs, as well as the S&P 500, in its first 12 months, delivering outsized gains while obscuring portfolio holdings. FDG offers disclosures only quarterly.
This active ETF is a concentrated portfolio of about 30 to 45 growth names that relies on a fundamental approach to spot companies that are not only growing, but poised to grow faster than their counterparts and broader market projections.