Multifactor ETFs Poised To Grow In 2017

January 04, 2017

DEUS Outperformed All Of Them

Outperforming all five of its multifactor brethren in 2016 was the Deutsche X-trackers Russell 1000 Comprehensive Factor (DEUS), the youngest and one of the smallest of the bunch. DEUS launched in November 2015, seeks to track a FTSE Russell index that combined the five above-mentioned quality, momentum, size, value and low volatility factors. Though it has just $33 million in assets, DEUS’ 12.80% gain in 2016 has been aided by its relatively high exposure to industrials (18%) and low exposure to technology (13%).

However, past performance is not indicative of future results. Indeed, CFRA highlights the records of these five ETFs more to signify the importance of understanding what’s inside. Our ETF rankings of more than 950 equity ETFs are based on a combination of holdings-level analysis and ETF-level analysis, including their expense ratios and bid/ask spreads.

We expect 2017 will be a year when more advisors seek out multifactor ETFs that feel more like active management than IVV and its market-cap-weighted peers, but are cheaper than the 1.1% for a large-cap mutual fund. If they do, we hope they finish their homework and look inside the portfolios first.

At the time of writing, neither the author nor his firm held any of the securities mentioned. Todd Rosenbluth is director of ETF and mutual fund research at CFRA, an independent research firm that acquired S&P Global Market Intelligence's equity and fund business in October 2016. He can be reached at [email protected]. Follow him at @ToddCFRA


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