iShares today is rolling out five multifactor equities ETFs that target four factors—quality, value, momentum and size. The launches set it up to be in direct competition with State Street Global Advisors, which has launched its own extensive family of multifactor “Quality Mix” ETFs in the past year.
The new funds and their expense ratios are as follows:
- iShares FactorSelect MSCI USA ETF (LRGF), 0.35 percent, or $35 for each $10,000 invested
- iShares FactorSelect MSCI Intl Small-Cap ETF (ISCF), 0.60 percent
- iShares FactorSelect MSCI International ETF (INTF), 0.45 percent
- iShares FactorSelect MSCI Global ETF (ACWF), 0.50 percent
- iShares FactorSelect MSCI USA Small-Cap ETF (SMLF), 0.50 percent
The five funds use four individual factors—again: quality, value, momentum and size—to arrive at a composite score for each stock, with the highest-scoring stocks selected for the underlying index. The funds' underlying benchmarks use an optimization-focused weighting approach that aims to maximize each index's exposure to the four targeted factors while still maintaining a similar risk profile to the market-cap-weighted parent index, according to the index methodology.
As noted, the new ETFs will compete with a growing number of “smart beta” funds already on the market, not least State Street Global Advisors’ similar lineup of so-called Quality Mix funds that combine three investment factors—minimum volatility, quality and value. All three factors are considered to be the factors targeted in the investment strategies of Warren Buffett.
The U.S.-focused FactorSelect fund, LGRF, will compete directly with State Street’s SPDR MSCI USA Quality Mix ETF (QUS), but SSgA’s QUS is 20 basis points cheaper than the iShares product. Meanwhile, the SPDR MSCI EAFE Quality Mix ETF (QEFA | C-84) tracks a similar space as INTF; both target developed markets and exclude the U.S., but QEFA also excludes Canada.
New Airlines ETF Debuts
U.S. Global Investors is making an effort where two established ETF providers have previously tried and failed. Today it is launching the U.S. Global Jets ETF (JETS). The new fund will track 30 to 35 airlines via an index that uses a tiered weighting system reliant on market capitalization, number of passengers and other fundamental factors.
Guggenheim—then operating under the name Claymore—and Direxion each launched similar funds in 2009 and 2010, respectively, but they didn’t trade for long. The Claymore/NYSE Arca Airline ETF (FAA) closed in 2013, while the Direxion Airline Shares ETF (FLYX) was shuttered in 2011.
The decisions by both companies may have been premature. Since 2012, airlines as a group have been on the rise in terms of stock prices, more than tripling, according to the NYSE Arca Airline Index.
JETS comes with an expense ratio of 0.60 percent.