Biggest Multifactor ETF Owners: Issuers

July 30, 2019

At a glance, multifactor ETFs appear to be gaining steam in 2019. Year to date, the 278 ETFs that use multifactor strategies (excluding leveraged and inverse products) have brought in $7.1 billion in new net investment dollars, with funds from Goldman Sachs, John Hancock and other large asset managers attracting plenty of headlines (including from us!).

While it's true that large amounts of cash are moving into select multifactor funds, much of the growth appears to be from these asset managers eating their own lunch, as opposed to an organic groundswell of retail or advisory demand for multifactor strategies.

US Large Cap ETFs Attract Most Assets

For starters, most of the new net money into multifactor strategies so far in 2019 has been concentrated into the top 10 largest inflow-getters. Together, these 10 ETFs account for $6.9 billion in new assets, or a whopping 96% of all net flows:

 

Multifactor ETFs With Highest YTD Net Flows
Ticker Fund ER AUM YTD Return YTD Flows ($M)
GSLC  Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF 0.09% $6.13B 19.92% $1,670.82
FXU  First Trust Utilities AlphaDEX Fund 0.63% $1.35B 8.04% $910.51
RODM  Hartford Multifactor Developed Markets (ex-US) ETF 0.29% $2.32B 11.40% $821.58
OMFL  Invesco Russell 1000 Dynamic Multifactor ETF 0.29% $1.04B 21.22% $697.53
FLQL  Franklin LibertyQ U.S. Equity ETF 0.25% $1.21B 20.14% $696.32
SPHD  Invesco S&P 500 High Dividend Low Volatility ETF 0.30% $3.36B 13.21% $565.13
JHEM  John Hancock Multifactor Emerging Markets ETF 0.55% $816.08M 11.40% $493.30
IGF  iShares Global Infrastructure ETF 0.47% $3.23B 19.12% $364.40
AGGY  WisdomTree Yield Enhanced U.S. Aggregate Bond Fund 0.12% $741.61M 8.26% $338.24
JHMM  John Hancock Multifactor Mid Cap ETF 0.45% $1.19B 22.56% $321.36

Source: ETF.com; data as of July 26, 2019

 

The Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF (GSLC) alone has brought in almost $1.7 billion so far in 2019. Last week, GSLC brought in $591 million, bringing it above $6 billion in assets under management and placing it among the ETFs with the highest weekly creations (read: "Weekly ETF Inflows Slow To $2.3B").

The majority of the biggest-drawing multifactor ETFs are U.S. large cap funds, like GSLC, including the $1.0 billion Invesco Russell 1000 Dynamic Multifactor ETF (OMFL); the $1.2 billion Franklin LibertyQ U.S. Equity ETF (FLQL); and the $3.4 billion Invesco S&P 500 High Dividend Low Volatility ETF (SPHD).

Other top flows-getters included the $1.4 billion First Trust Utilities AlphaDEX Fund (FXU), which weights utilities according to value and growth factors, and the $742 million WisdomTree Yield Enhanced U.S. Aggregate Bond Fund (AGGY), the only fixed income multifactor fund to make the list.

Popularity Not Tied To Performance

Curiously, money moving into these funds doesn't appear to be chasing performance. None of 2019's most popular multifactor ETFs has provided outperformance.

In fact, the best-performing multifactor ETFs are a blend of semiconductor and broad tech plays, with a few outliers, such as gold miners and Brazil equities:

 

Best-Performing Multifactor ETFs YTD
Ticker Fund Issuer AUM YTD Return
SGDJ  Sprott Junior Gold Miners ETF Sprott, Inc. $66.67M 40.22%
PSJ  Invesco Dynamic Software ETF Invesco $539.40M 35.25%
FTXL  First Trust Nasdaq Semiconductor ETF First Trust $29.44M 35.17%
FXL  First Trust Technology AlphaDEX Fund First Trust $2.41B 32.93%
JHMT  John Hancock Multifactor Technology ETF John Hancock $59.61M 32.34%
PSI  Invesco Dynamic Semiconductors ETF Invesco $188.49M 31.23%
FBZ  First Trust Brazil AlphaDEX Fund First Trust $142.28M 29.42%
PKB  Invesco Dynamic Building & Construction ETF Invesco $110.64M 29.37%
DTEC  ALPS Disruptive Technologies ETF SS&C $75.51M 29.02%
FFTY  Innovator IBD 50 ETF Innovator Capital Management $431.88M 28.11%

Source: ETF.com; data as of July 26, 2019

 

In contrast, only three of 2019's most popular multifactor ETFs even break 20% for their year-to-date returns. That doesn't even beat the SPDR S&P 500 ETF Trust (SPY), which has returned 21.7% year to date.

Issuers Like Their Own Multifactor ETFs

Of course, performance isn't everything. It's entirely possible that—middling returns or no—retail investors would be buying these ETFs anyway, because they believe that much in their potential.

But 13F filing data suggests many of the most popular multifactor ETFs are owned largely by their own issuers, indicating asset managers are the ones funneling client cash into their own in-house products.

Goldman Sachs, First Trust, Franklin Templeton and John Hancock are all the largest stakeholders in their own multifactor ETFs:

 

Ownership Of Multifactor ETFs
Ticker Fund Issuer Top Holder Of Fund Outstanding Shares Owned
GSLC  Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF Goldman Sachs Goldman Sachs 9%
FXU  First Trust Utilities AlphaDEX Fund First Trust First Trust 44%
RODM  Hartford Multifactor Developed Markets (ex-US) ETF Hartford Morgan Stanley 12%
OMFL  Invesco Russell 1000 Dynamic Multifactor ETF Invesco Invesco 68%
FLQL  Franklin LibertyQ U.S. Equity ETF Franklin Templeton Investments Franklin Templeton Investments 83%
SPHD  Invesco S&P 500 High Dividend Low Volatility ETF Invesco Merrill Lynch 4%
JHEM  John Hancock Multifactor Emerging Markets ETF John Hancock ManuLife Financial 97%
IGF  iShares Global Infrastructure ETF BlackRock Northern Trust Investments 17%
AGGY  WisdomTree Yield Enhanced U.S. Aggregate Bond Fund WisdomTree Horizon Investments 7%
JHMM  John Hancock Multifactor Mid Cap ETF John Hancock ManuLife Financial 33%

Sources: ETF.com, FactSet; data as of July 26, 2019

 

The $1.2 billion Franklin LibertyQ U.S. Equity ETF (FLQL), for example, is owned 83% across two Franklin Templeton divisions: Franklin Advisers and Franklin Mutual Advisers. The $814 million John Hancock Multifactor Emerging Markets ETF (JHEM), meanwhile, is owned 97% by ManuLife Financial, parent company of John Hancock.

That's not the case for most multifactor funds launched by legacy ETF issuers like iShares, WisdomTree and Invesco. For most of these products, the largest stakeholders tend to be market makers and asset managers targeting financial advisors. The one exception is the $1 billion Invesco Russell 1000 Dynamic Multifactor ETF (OMFL), 68% of which is owned by Invesco itself.

Multifactor Revolution?

There's nothing inherently wrong with money managers buying their own book. To some extent, we ought to expect it; these companies attract clients based on the value proposition offered by their proprietary investment approaches, so why wouldn't they put clients' money into products reflecting their unique brand of thinking?

However, despite strong flows and good press, multifactor ETFs clearly remain a niche product for a niche audience. It's unclear what—if any—appeal multifactor ETFs have to a wider audience of retail investors and independent advisors; and for now, their growth appears to be hamstrung by the size of their issuers' pocketbooks.

Contact Lara Crigger at [email protected]

Find your next ETF

Reset All