BlackRock launches actively managed factor rotation ETF

Mar 21st, 2019 | By | Category: Equities

BlackRock has ditched its iShares brand for the launch of its latest ETF – the BlackRock US Equity Factor Rotation ETF (DYNF US).

BlackRock launches actively managed multifactor ETF

The new BlackRock ETF seeks to capture the long-term premia and short-term returns associated with the quality, value, size, minimum volatility, and momentum factors.

Listed on NYSE Arca, the actively managed fund utilizes a factor rotation model within the large- and mid-cap segments of the US equity market.

The strategy provides exposure to quality (financially healthy firms), value (inexpensive stocks), size (smaller companies), minimum volatility (lower volatility stocks) and momentum (trending stocks) factors.

The starting point for the strategy is an equally weighted allocation across all five factors, thereby capturing the long-term premium associated with each factor.

The model then seeks short-term returns by tilting factor weights based on information about the current economic cycle as well as valuations and recent trends for each factor.

The fund’s managers will target a maximum allocation of 35% for any single factor; however, the model allows for a company to be included under more than one of the five equity style factors rather than being solely assigned to a single style factor.

In terms of asset allocation, the fund’s top five sector exposures are currently Information Technology (18.75%), Health Care (17.45%), Financials (11.45%), Consumer Discretionary (10.28%) and Consumer Staples (9.03%). The top five holdings, amounting to 9.14% of the portfolio, are Johnson & Johnson, Visa, Pfizer, Mastercard and Apple.

The portfolio management team is headed up by Ked Hogan, Head of Investments for BlackRock’s Factor-Based Strategies Group; Michael Gates, Managing Director in the Multi-Asset Strategies Group; and Philip Hodges, Head of Research in the Factor-Based Strategies Group.

Their performance benchmark consists of an 80% allocation to the MSCI USA Index and a 20% allocation to the MSCI USA Minimum Volatility Index.

The fund has launched with $20 million of seed capital and comes with an expense ratio of 0.30%.

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