iShares Launches Multi-Factor Smart Beta ETFs

Each ETF offers exposure to four risk factors within one fund: value, quality, momentum and size  

Editor, Europe
Reviewed by: Rachael Revesz
Edited by: Rachael Revesz

iShares has expanded its smart beta exchange traded fund (ETF) range with the launch of three multi-factor funds which offer investors exposure to equities in different regions that aim to generate returns through different market cycles.

The funds, which focus on value, quality, momentum and size, cover global equities, European equities and U.S. equities. They have annual fees of 0.50 percent, 0.45 percent and 0.35 percent respectively.

Each “FactorSelect” fund tracks an MSCI Multiple-Factor Index, which selects a sample of stocks from its parent MSCI benchmark, focusing on those companies that fit one of the four risk factor criteria.

Looking closer at the global equity ETF – the iShares FactorSelect MSCI World UCITS ETF (IFSW) – it tracks 351 holdings with almost 50 percent in the U.S., followed by 12 percent in Japan and 7 percent in the UK. It rebalances quarterly and accumulates dividends. Top holdings are biotech firm Gilead Sciences, management consultancy Accenture and computer company Hewlett Packard.

The iShares FactorSelect MSCI Europe UCITS ETF (IFSE) tracks 114 stocks, with most of the weighting in the UK, Switzerland and Germany. Top holdings include insurance group AXA, Imperial Tobacco Group and Irish biotech firm Shire.

Finally the iShares FactorSelect MSCI USA UCITS ETF (IFSU) replicates the performance of 137 holdings and top positions go to Gilead Sciences, insurance agency American International Group and Accenture.

Tom Fekete, head of EMEA product, iShares, said in a statement that the funds aim to perform well in different market conditions.

“Research has shown that certain investment styles have, over time, provided a higher risk adjusted return than the overall market. These themes are well understood by investors - seeking high quality balance sheets or inexpensive stocks, for example – and have long been a staple of active mutual fund strategies,” he said.

iShares first launched its smart beta range in October 2014 with four ETFs tracking the same risk factors but individually, and they all focused on global equities.

Rachael Revesz joined in August 2013 as staff writer. Previously an investment reporter at Citywire, she has a background in writing content for retail financial advisors and has covered a wide range of subjects in finance. Revesz studied journalism at PMA Media, which has since merged with the Press Association. She also holds a B.A. in modern languages from Durham University, as well as CF1 and CF2 financial planning certificates from the CII.