From the June 2013 issue of Research Magazine • Subscribe!

May 28, 2013

Quant ETFs Debut

BlackRock, manager of the iShares ETFs, released five ETFs that select stocks by using quantitative screens.

The first group of funds, the iShares Enhanced ETFs, uses BlackRock’s proprietary research rather than tracking an index.

The iShares Enhanced US Large Cap ETF (IELG) and the iShares Enhanced US Small-Cap ETF (IESM) use multiple factors such as quality, value and market size to determine what stocks will be included within the portfolio.

According to BlackRock, its “Enhanced ETFs” were designed in partnership with registered investment advisors (RIAs) and institutional investors, specifically public pensions, to provide a broader range of solutions to help manage equity exposures and risk.

Factors are a set of investment characteristics that explain the risk and return behavior of an asset or stock. Factor investing offers an alternative approach to traditional market-capitalization investing by aiming to cut market volatility.

The other three funds launched are the iShares MSCI USA Momentum Factor ETF (MTUM), iShares MSCI USA Size Factor ETF (SIZE) and the iShares MSCI USA Value Factor ETF (VLUE). The iShares MSCI Factor ETFs were designed at the request of institutional investors, such as Arizona State Retirement System (ASRS), who want exposure to a specific individual factor—value, size or momentum—so they can overweight or hedge a single factor that has historically explained a significant part of companies’ return and risk over the long-term.

Reprints Discuss this story
This is where the comments go.