BlackRock launches Russell 1000-based multifactor style ETFs

Jan 16th, 2020 | By | Category: Equities

FACTOR INVESTING - THURSDAY 14TH JULY 2022 (08:15-11:30) - THE BERKELEY, LONDON Please join us for our annual factor investing breakfast briefing with participation from MSCI, FlexShares ETFs, Tabula and Professor Stefan Zohren, Deputy Director of the Oxford-Man Institute of Quantitative Finance. Please register now if you would like to attend.


BlackRock has launched two new US equity factor ETFs on Cboe BZX Exchange.

BlackRock launches multifactor style ETFs

BlackRock has launched two multifactor ETFs that select stocks from the Russell 1000 growth and value universes.

The iShares Factors US Growth Style ETF (STLG US) and the iShares Factors US Value Style ETF (STLV US) provide multifactor exposure to stocks that have been pre-screened for either growth or value style characteristics.

Each fund comes with an expense ratio of 0.25%.

Methodology

The funds are linked to indices provided by FTSE Russell – the Russell US Large Cap Factors Growth Style Index and Russell US Large Cap Factors Value Style Index respectively.

The indices select their constituents from the parent Russell 1000 Growth and Russell 1000 Value index universe which represent the growth and value segments of the Russell 1000 Index.

By using the Russell 1000 Growth and Russell 1000 Value indices as the starting universes, the ETFs provide a tilt towards stocks and sectors with predominantly growth (higher price-to-book; and higher forecasted sales growth) or value (lower price-to-book; and lower forecasted sales growth) profiles.

The constituents of each parent index are then assigned a composite multifactor score based on an analysis of momentum, quality, value, size, and low volatility characteristics.

Each index uses an optimization process to select around 100-150 stocks and weights them so as to maximize the portfolio’s multifactor score while maintaining risk similar to the parent index.

The growth index currently consists of 117 stocks and has half of its exposure allocated to the information technology sector. The next largest sector exposures are consumer discretionary (17.5%) and healthcare (13.6%). Microsoft and Apple drive a significant portion of the index’s performance with weights of 9.7% and 7.0% respectively.

The value index has 151 constituents and is primarily exposed to the financials (26.7%), consumer discretionary (12.1%), consumer staples (10.7%), healthcare (10.3%), and industrials (8.9%) sectors.

Tags: , , , , , , , , ,

Leave a Comment