Today Exponential ETFs is rolling out an ETF that targets companies based on the value of their brands. The Brand Value ETF (BVAL) tracks an index developed by Brandometry that is driven by a survey of perceptions about various companies’ brands.
BVAL comes with an expense ratio of 0.65% and lists on the NYSE Arca exchange.
The fund’s underlying index, the BrandTransact 50 Index, covers 50 U.S. companies that are equally weighted at the index’s annual rebalancing. Eligible companies must be included in the Wilshire 5000 Index and have two years’ worth of brand scores assigned by consulting firm Tenet Partners, the prospectus said.
An Umbrella Over Intangibles
“I think brand value is one of the components that has been overlooked by the financial services industry for a long time,” said Larry Medin, co-founder of index provider Brandometry.
“We believe that brand is everything a person thinks they know or knows about a company, and that includes its reputation, innovation, leadership—all the things that are not necessarily shown in the tangible assets of the company. Brand is really the umbrella of all intangibles,” he added.
Tenet focuses on brand innovation and marketing, and the company conducts surveys with a pool of roughly 10,000 participants drawn from the investment and business communities, end users and potential consumers. The surveys focus on the familiarity and favorability of the brands in question, with a final quantitative “BrandPower” score assigned to each company. Companies are selected for the index based on their BrandPower-to-market capitalization ratio for the two years prior, with the top 50 companies in terms of this ratio making the cut for inclusion in the index, the prospectus indicated.
Medin notes that BVAL looks at how a company’s BrandPower score, or the strength of its overall brand, compares with what’s happening to the company’s underlying stock price.
“Often we see disconnects between a well-known brand and its underlying share price. Our index has been able to identify when it’s the right opportunity to put those brands and companies into a portfolio,” he said.