ETF Watch: Oppenheimer Plans Multifactor Funds

A new filing outlines plans for a 'Dynamic Factor' ETF family that will adjust its factor exposures.
Reviewed by: Staff
Edited by: Staff

A recent filing from Oppenheimer Funds outlines plans for four multifactor ETFs targeting U.S. and non-U.S. markets. The lineup will include two U.S. funds, a developed-market fund and an emerging market fund.

The methodology will target five factors: value, momentum, quality, low volatility and size. The factor exposures will vary according to what stage the current economic cycle is in, whether it be expansion, slowdown, contraction or recovery. The indexes will be rebalanced and reconstituted monthly, the prospectus indicated.

Although the names of the U.S. funds have not been finalized, one will track an index derived from a parent benchmark covering the largest 1,000 U.S. stocks, while the other will track an index that selects its components from a 2,000-stock parent index covering the small-cap space. This suggests the four indexes underlying the funds will be derived from the FTSE Russell indexes.

The international developed and the emerging market funds will both track indexes that include small-, mid- and large-cap stocks.

New Direction

OppenheimerFunds already offers a raft of smart-beta ETFs focused on a revenue-weighted approach. This filing represents a new direction for the firm and a sort of “next generation” approach to the multifactor concept.

Existing multifactor ETFs keep their factor exposures static, and most of the time equal-weight them within the portfolio; the OppenheimerFunds approach is one of the first to propose dynamic factor exposures that respond to market conditions. PIMCO filed for funds taking a similar approach back in February.

The filing did not include tickers, expense ratios or listing exchange.

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