Best New Smart-Beta or Factor ETF: iShares Evolved U.S. Sector ETFs (Series) (IECS)
Awarded to the most important new ETF launched in 2018, regardless of asset class, that uses a quantitative, research-driven approach to attempt to deliver superior long-term risk-adjusted returns.
Artificial intelligence (AI) is at the core of what makes the iShares Evolved U.S. Sector ETFs the best in smart-beta innovation in 2018. The Evolved sector series includes seven different funds in all—the iShares Evolved U.S. Consumer Staples ETF (IECS) is a mere representative of the entire series for the purpose of this award.
With the use of AI—including machine learning, natural language processing and text analysis—iShares sifts through big data to group similar companies based on key business drivers; any given company may fall into more than one sector portfolio in the Evolved series, and is weighted accordingly. As such, the suite tackles the reality that, in today’s highly connected economy, some companies may fit in more than one traditional GICS sector classification. The Evolved ETFs offer a new way to slice and dice sectors that are dynamic and ever-changing—and for just 0.18% apiece.
- Fidelity Low Duration Bond Factor ETF (FLDR)
- IQ Short Duration Enhanced Core Bond U.S. ETF (SDAG)
- U.S. Diversified Real Estate ETF (PPTY)
- Xtrackers Russell 1000 US QARP ETF (QARP)
Best New Active ETF: Vanguard U.S. Multifactor ETF (VFMF)
Awarded to the most important new actively managed ETF launched in 2018, regardless of asset class.
Despite being known for its pioneering index funds, Vanguard has a long history in active management. Until recently, however, it hadn't launched any actively managed ETFs. So it was big news when the issuer rolled out its first suite of active ETFs in February 2018. The largest of these is the Vanguard U.S. Multifactor ETF (VFMF), which invests in U.S. equities exhibiting value, momentum, quality and low-volatility characteristics. It offers Vanguard's signature broad diversification, selecting holdings across the size spectrum and evaluating them based on a quantitative model. Best of all, VFMF is extremely low-cost, with an expense ratio of just 0.18%. Only a handful of active U.S. stock ETFs come cheaper, most of which are Vanguard's own single-factor funds.
- AI Powered International Equity ETF (AIIQ)
- iShares Evolved U.S. Sector ETFs (Series) (IECS)
- JPMorgan Ultra-Short Municipal Income ETF (JMST)
- WisdomTree Emerging Markets Multifactor Fund (EMMF)
- WisdomTree International Multifactor Fund (DWMF)
Best New ESG ETF: Goldman Sachs JUST U.S. Large Cap Equity ETF (JUST)
Awarded to the most important ESG ETF launched in 2018.
In an increasingly “greenwashed” field of ESG funds that are socially responsible in name only, the Goldman Sachs JUST U.S. Large Cap Equity ETF (JUST) attempts to truly capture investors’ priorities. The fund’s benchmark starts with a series of public opinion surveys, in which respondents identify the business practices that most matter to them—everything from how companies treat their workers to the eco-friendliness of their supply chain. Large-cap stocks are then ranked and weighted by the behaviors most important to respondents, and the index is reconstituted each year based on that year’s survey results. As such, JUST evolves as investors’ concept of social justice changes, so that its portfolio always reflects whatever matters most to investors in the moment it matters most.
- InsightShares LGBT Employment Equality ETF (PRID)
- iShares ESG U.S. Aggregate Bond ETF (EAGG)
- Vanguard ESG International Stock ETF (VSGX)
- Vanguard ESG U.S. Stock ETF (ESGV)
Thematic ETF of the Year: VanEck Vectors Video Gaming and eSports ETF (ESPO); EventShares U.S. Policy Alpha ETF (PLCY) (TIE)
Awarded to the most important “thematic” ETF of 2018, as measured by its ability to capture important macro plays that can lead to specific portfolio outcomes.
There was a tie for Thematic ETF of the Year, with the VanEck Vectors Video Gaming and eSports ETF (ESPO) and the EventShares U.S. Policy Alpha ETF (PLCY) each claiming the prize. Both funds are groundbreakers, in their own ways.
ESPO, which tracks global video gaming companies, is the first ETF to include esports in that definition, including league operators, streaming services and platform providers. PLCY, meanwhile, is an actively managed fund that chooses its holdings based on how the companies will be affected by U.S. government regulations, trade policies and fiscal spending. Launched in 2017, PLCY was revamped in April 2018 to combine the objectives of three different funds that focused on policy from partisan and tax perspectives.