Bridgeway launches US small-cap value ETF

Mar 14th, 2023 | By | Category: Equities

Texas-based asset manager Bridgeway Capital Management has launched its second ETF, an actively managed fund providing broad exposure to value-oriented US small-cap equities.

Bridgeway launches US small-cap value ETF

The ETF provides broad exposure to US small-cap equities which Bridgeway has identified as value-oriented.

The EA Bridgeway Omni Small-Cap Value ETF (BSVO US) has been listed on Nasdaq with an expense ratio of 0.47%.

The fund was created by reorganizing the Bridgeway Omni Small-Cap Value Fund which houses $780 million in assets and has a performance track record stretching back to August 2011.

That fund has notably outperformed its benchmark since inception, delivering a return of 10.85% per annum compared to 9.34% for the Russell 2000 Value Index.

The investment team that is directly involved in managing the ETF includes John Montgomery, Bridgeway’s President, CEO, and co-Chief Investment Officer; Elena Khoziaeva, Head of US Equity; Christine Wang, Portfolio Manager; and Michael Whipple, Portfolio Manager.

The team selects constituents for the ETF from an initial universe comprising companies that fall within the lowest 15% of all listed US firms when ranked by market capitalization.

Bridgeway uses a proprietary statistical model to identify value stocks which the firm defines as companies that are priced cheaply relative to financial measures of worth such as price-to-book value, price-to-earnings, price-to-sales, or price-to-cash flow ratios. Rather than target select value stocks that Bridgeway deems to have significant price appreciation potential, the ETF delivers broad exposure to the stocks that meet Bridgeway’s definition of value-oriented.

Stocks that are chosen for the portfolio will generally be weighted by market capitalization although Bridgeway may tweak these weights in order to manage risks related to diversification or ESG profile.

At launch, the ETF was invested in nearly 600 stocks with the largest holding – PBF Energy – accounting for a weight of just 1.2%. Notable sector exposures included financials at 36.8% (overweight compared to the sector’s weight of 28.8% in the Russell 2000 Value Index), energy at 14.3% (vs. 6.2%), industrials at 13.2% (vs. 13.3%), and consumer discretionary at 12.0% (vs. 10.0%). Exposure to health care stocks was notably lower at just 2.4% (vs. 10.5%).

Bridgeway debuted its first ETF in October of last year. The EA Bridgeway Blue Chip ETF (BBLU US) is also actively managed, harnessing Bridgeway’s proprietary research to build a high-conviction portfolio of renowned US large-cap equities. BBLU currently houses $120 million in assets and comes with an expense ratio of 0.15%.

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