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Portfolio > ETFs

Smart-Beta ETFs Cross 10-Year Threshold

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With more than 1,000 smart-beta ETFs now trading — making up roughly a seventh of the $4 trillion ETF market, according to the Financial Times — factor-based products have found a home in advisor portfolios.

Oppenheimer Funds recently passed a milestone with three of its revenue-weighted smart-beta funds reaching a 10-year anniversary, having been launched in the early days of this category.

OppenheimerFunds’ Large Cap Revenue ETF (RWL), Mid Cap Revenue ETF (RWK) and Small Cap Revenue ETF (RWJ) together have more than $1.7 billion in AUM. The Small Cap RWJ ranked in the 4th percentile of Morningstar 10-year rankings, while the Mid Cap RWK ranked in the 10th percentile and the Large Cap RWL ranked in the 11th percentile.

“Having RWL, RWK and RWJ reach their 10-year anniversary is a very significant milestone, given how new the product category is and how few smart-beta ETFs have similar long-term track records,” said Sharon French, head of beta solutions at OppenheimerFunds. French told last year that the revenue-weighted factor is not traditional and does two things: it tilts a portfolio toward value and reduces the portfolio’s momentum because revenue doesn’t trade off price.

The first smart-beta funds were launched at the turn of the millennium and focused on value and dividend capturing. Meanwhile, the Oppenheimer funds focused on revenue as a factor, weighting themselves to top-line revenue instead of market capitalization.

These smart beta ETFs provide greater exposure to lower valuation companies than market-cap benchmarks, according to OppenheimerFunds. Since 2008, the Large Cap RWL’s annualized return is 8.84%. The Mid Cap RWK has a 10.03% annualized return since inception. The Small Cap RWJ, which focuses on the S&P 600, has an 11.21% annualized return since inception.


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