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|
|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.