Smart Beta ETFs Tilt Target Date Funds

May 17, 2017

Know Your Exposure

CFRA agrees and points to end of first-quarter exposure differences between FUQIX, FQAL, the iShares Edge MSCI USA Quality Factor ETF (QUAL) and the PowerShares S&P 500 Quality Portfolio (SPHQ).

Of this quality index quartet, FUQIX had the highest exposure to information technology stocks (37% of assets), tracking a nonsector neutral MSCI index, while SPHQ had the greatest weighting in consumer staples (18%). 

Sector Exposure in Quality Index Funds Differs

Source: CFRA’s MarketScope Advisor, March 31, 2017

Not surprisingly, year-to-date through May 12, FUQIX’s 9.6% gain was ahead of FQAL (7.1%), QUAL (6.5%) and SPHQ (6.0%).

In ranking ETFs and mutual funds, independently, costs and what’s inside the portfolio matter more than performance record. Asset allocation products that hold a firm’s own mutual funds are highly common. Yet as index-based factor strategies become more accepted by investors, we expect more firms will launch asset allocation products using these targeted offerings as the constituents.

Reports on these ETFs and mutual funds can be found on MarketScope Advisor and other platforms on which CFRA research is available.

At the time of writing, neither the author nor his firm held any of the securities mentioned. Todd Rosenbluth is director of ETF and mutual fund research at CFRA, an independent research firm that acquired S&P Global Market Intelligence's equity and fund business in October 2016. He can be reached at [email protected]. Follow him at @ToddCFRA.


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