BlackRock to switch risk-weighted ETFs to low size indices

Nov 5th, 2018 | By | Category: Equities

BlackRock is set to change the indices on a pair of NYSE Arca-listed ETFs targeting smaller stocks.

BlackRock to switch risk-weighted ETFs to low size indices

The funds are due to begin tracking new MSCI indices that explicitly target the small size factors.

The funds, which currently provide exposure to risk-weighted portfolios of US or global ex-US equities, will switch to indices that target returns attributable to the low size factor.

The iShares Edge MSCI USA Size Factor ETF (SIZE US) will cease following the MSCI USA Risk Weighted Index and begin tracking the MSCI USA Low Size Index; while the iShares Edge MSCI Intl Size Factor ETF (ISZE US) will cease tracking the MSCI World ex USA Risk Weighted Index in favour of the MSCI World ex USA Low Size Index.

The main difference between the outgoing indices and the new indices is that the outgoing indices weight constituents based on relative stock price variance calculated using three years of weekly returns. Those with lower historical variance are assigned larger weights in the index. According to MSCI, this leads the index to have a bias towards stocks with smaller capitalizations. The new indices will explicitly target the low size factor by reweighting constituents to favour those with smaller market capitalizations.

The changes are due to be implemented around 30 November 2018. The funds’ names and tickers are not expected to change.

Both ETFs will remain listed on NYSE Arca. The US equity fund comes with an expense ratio of 0.15% and has approximately $210 million in assets under management, while its international counterpart costs 0.30% and has just $5m AUM.

Current shareholders in the funds are not required to take any actions as a result of these changes.

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