Smart-beta ETFs have long been investors’ choice. But issuers seem not so happy with them as Global X recently tuned up the concept and launched four ‘scientific beta’ ETFs. Value, Size, Momentum and Low Volatility are the key criteria that the stocks should score higher on to get a place in the index. To add to this, these ETFs are equal-weighted in nature.
These funds intend to outperform traditional indexes by following ‘academically driven multi-factor indexes developed by ERI Scientific Beta’ per the source. We detail below these multi-factor ETFs.
Global X Scientific Beta US ETF (SCIU) in Focus
The U.S. markets are troubled by mixed economic data points and baffled by rate hike worries. So a scientific beta approach in stock picking as stated by SCIU might help investors wait out volatility.
The newly launched ETF looks to track the performance of the Scientific Beta United States Multi-Beta Multi-Strategy Equal Risk Contribution index. The fund currently holds 483 stocks. Sector wise, Financials dominates the fund with 18.2% allocation, while IT (15.7%) and Health Care (14.0%) occupy the next two spots. The fund is low on Telecom.
The fund has very low company-specific concentration risk with no single stock occupying more than 0.80% of the total. The fund charges 35 basis points as fees.
Competition: The space is crowded with products such as Large Cap Core AlphaDEX Fund (FEX), MSCI USA Minimum Volatility ETF (USMV) and MSCI USA Minimum Volatility ETF (IELG) on the large-cap surface being the likely competitors.