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March 21, 2019 at 04:16 PM
BlackRock just launched the first ETF that bears its name rather than the iShares moniker. The BlackRock U.S. Equity Factor Rotation ETF (DYNF) is one of two factor ETFs that the world’s largest asset manager introduced on Thursday; the other is the iShares Focused Value Factor ETF (FOVL).
“If you need higher returns than a market cap index or want like returns [to an index] with reduced risk, then factors have a role to play in your portfolio,” said Andrew Ang, head of factor strategies at BlackRock at a meeting with reporters. “Factors are active,” said Ang. They “embody the best of active management” and look toward “what really matters and drives returns.”
Holly Framsted, head of U.S. Factor ETFs at BlackRock, said these and other factor ETFs are for investors who have a “proclivity to active management.”
DYNF is a diversified U.S. equity ETF with exposure to five diverse factors: value, momentum, minimum volatility, size and quality. It uses a dynamic approach to rotate factor exposures, based on outlooks for valuations, relative strength, dispersion and economic conditions.
The ETF can add value in two ways — via long-term exposure to factors and incremental return through the timing — or rotating — of certain factors, said Ang. DYNF has an expense ratio of 30 basis points and is currently overweight quality and underweight value, which tends to underperform in late-stage economic cycles, like the current one. BlackRock expects to adjust positions within DYNF monthly, with an annual turnover between 80% and 100%.
