Market Vectors ETF Trust said early Thursday that it launched four new exchange-traded funds (ETFs) powered by factors, or investment screens, that track companies according to their return on equity, leverage, earnings growth and dividends.
The new ETFs are the Market Vectors MSCI International Quality ETF (QXUS), Market Vectors MSCI Emerging Markets Quality ETF (QEM), Market Vectors MSCI International Quality Dividend ETF (QDXU), and Market Vectors MSCI Emerging Markets Quality Dividend ETF (QDEM).
“Quality matters. Quality as an investment factor has historically outperformed broad international and emerging markets equities with relatively lower volatility over long time periods, but until now, a quality — focused, factor — based approach has usually been accessible only through active strategies,” said Amrita Bagaria, international-equity ETF product manager with Market Vectors, in a press release.
“We have heard the concerns of investors who understand that you need to be selective and find a way to identify quality stocks, because you don’t necessarily want to hold every single company when investing in international or emerging markets,” Bagaria explained.
QXUS’s gross expense ratio is 0.69%, and its net expense ratio is 0.45%. QEM has a gross expense ratio of 0.74% and a net expense ratio of 0.50%. QDXU’s gross expense ratio is 0.67% and its net expense ratio is 0.45%. QDEM has a gross expense ratio of 0.73% and a net expense ratio of 0.50%.
The net expense ratios for all four funds are capped contractually until at least Feb. 1, 2015, according to Market Vectors.
“Holdings in both indexes are screened for historically high return on equity [ROE], stable annual earnings growth and low financial leverage,” said Diana Tidd, managing director and head of the MSCI Index Business in the Americas, in a statement. “Our research suggests that the Quality growth companies have high ROE, low financial leverage and stable earnings that are uncorrelated with the broad business cycle and may provide diversification benefits in portfolio allocation.”
Forces Behind Factoring
iShares recencenty introduced factor-based ETFs. The iShares MSCI USA Quality Factor ETF (QUAL), for instance, now has about $290 million in assets. According to Morningstar, QUAL had a price return of 11.7% in the fourth quarter vs. 10.5% for the S&P 500.