Global asset manager Columbia Threadneedle Investments has expanded its suite of strategic beta ETFs with the launch of two new factor-driven ETFs.
Marc Zeitoun, Head of Strategic Beta at Columbia Threadneedle Investments.
The Columbia Research Enhanced Core ETF (RECS US) and Columbia Research Enhanced Value ETF (REVS US) have listed on NYSE Arca and are linked to proprietary in-house indices.
The indices, which are independently calculated by FTSE Russell, seek to outperform well-known US large-cap and US large-cap value benchmarks by harnessing insights from Columbia Threadneedle’s quantitative research team.
The indices favour stocks with strong quality, value, and momentum characteristics.
Marc Zeitoun, Head of Strategic Beta at Columbia Threadneedle Investments, commented, “Today, many investors recognize the limitations of traditional benchmark investing and are looking for a more thoughtful approach to passive investing. RECS and REVS were designed with the benchmark investor in mind. They are built on the strength of our quantitative research and the active insights that underly our strategic beta solutions.”
Index methodology
The Columbia Research Enhanced Core ETF tracks the Beta Advantage Research Enhanced US Equity Index, which selects its constituents from the Russell 1000 Index universe. The universe consists of the 1,000 largest US-listed equities and represents the performance of the country’s large and mid-cap segments.
The Columbia Research Enhanced Value ETF tracks the Beta Advantage Research Enhanced US Value Index, which selects its constituents from the Russell 1000 Value Index, a subset of the Russell 1000 that currently consists of 760 stocks with the strongest exposure to the value factor.
Each Research Enhanced Index applies Columbia Threadneedle’s quantitative model to assign a multifactor score, based on earnings quality, cash flow yield, and price momentum, to each stock in the parent indices. Stocks are then ranked within each Global Industry Classification Standard (GICS) sector based on their multifactor score and the top 35% of companies within each sector are chosen for index inclusion.
Constituents are weighted by market capitalization. Reconstitution and rebalancing occur semi-annually.
The funds are competitively priced with expense ratios of 0.15% and 0.19% for the Core and Value ETFs, respectively.
“We are offering optimized equity exposure, with the potential for enhanced returns, at a price comparable to funds that track broader benchmarks,” added Zeitoun.
For investors looking for plain vanilla exposure to the Russell 1000 Index, the SPDR Portfolio Large Cap ETF (SPLG US), which costs just 0.03%, is the cheapest. An alternative to Columbia Threadneedle’s value play on this index might be the Vanguard Russell 1000 Value ETF which tracks the Russell 1000 Value Index. This fund comes with an expense ratio of 0.12%.