Daily ETF Watch: iShares Targets Factors

January 13, 2015

iShares, the world’s biggest ETF company, today looks to be launching two factor-targeting funds focused on different pockets of international stocks. The launches—and recent filings detailing a famiy of multifactor ETFs—suggest it’s about to square off with State Street Global Advisors in the realm of multifactor ETFs.

 

Today the San Francisco-based firm is rolling out the iShares MSCI International Developed Momentum Factor ETF (IMTM) and the iShares MSCI International Developed Quality Factor ETF (IQLT), which complement two ETFs that iShares launched last year. Those are the iShares MSCI USA Momentum Factor ETF (MTUM | A-59) and the iShares MSCI USA Quality Factor ETF (QUAL | A-80).

 

Those highly successful funds were both seeded with $100 million from the Arizona State Retirement System, which has integrated them into their portfolios; the funds have since gone on to accumulate hundreds of millions more in assets under management.

 

Like iShares’ other factor-based ETFs, the funds launching today will track indexes from MSCI, which has been rapidly expanding its offering of factor indexes. The benchmarks’ components are drawn from the top 85 percent of the market capitalization of the developed foreign markets in each index, meaning the large- and midcap segments.

Each ETF comes with an expense ratio of 0.30 percent.

 

More Factor-Based Funds Planned
A recent group of filings from iShares indicates the firm plans to expand its factor-based ETF offering to include funds combining multiple factors.

 

SSgA was really the first in this area, embracing MSCI’s “Quality Mix” indexes and launching about a dozen country and regional funds based on the concept. MSCI has marketed its Quality Mix indexes as targeting the same factors Warren Buffett does, terming the quality, minimum volatility and value factor combination “Buffett’s beta.”

 

The recent filings from iShares target four factors: quality, value, momentum and size. They include the following funds:

 

Currently, only the emerging market ETF will have a direct competitor in the SSgA lineup—the SPDR MSCI Emerging Markets Quality Mix ETF (QEMM | F-83), which currently has less than $6 million of assets under management. However, there is a SPDR MSCI U.S. Quality Mix ETF in registration, and if both firms expand their lineups of multiple-factor ETFs, they will inevitably find their products pitted against each other.

 

No exchange listings, tickers or expense ratios were included in the paperwork for the proposed iShares funds.

 

 

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