Compass EMP launches two volatility-weighted smart beta ETFs

Aug 20th, 2015 | By | Category: Equities

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Compass Efficient Model Portfolios (Compass EMP) has launched two volatility-weighted exchange traded funds (ETFs) which provide a smart beta approach to international equity investing.

Compass EMP launches two volatility-weighted smart beta ETFs

Stephen Hammers, Chief Investment Officer of Compass EMP Funds.

The new funds track the Compass EMP International 500 Volatility Weighted Index and the Compass EMP International High Dividend 100 Volatility Weighted Index which seek to outperform traditional indexing strategies through a combination of fundamental criteria and broad market volatility-weighting of individual securities.

“The Compass EMP methodology can provide advisors and their clients with a more effective way to achieve broad market exposure than traditional market-cap weighted indexes,” said Stephen Hammers, Chief Investment Officer for Compass EMP. “We are very excited to expand our existing ETF line-up to include two funds that may offer a tax efficient solution for investors seeking broad diversification outside of the US.”

The Compass EMP International 500 Volatility Weighted Index is designed to exhibit lower levels of absolute risk than the broad market and favour companies with earnings momentum. The index is built from the universe of all publicly traded stocks domiciled in developed countries outside of the US. The universe is screened on fundamental criteria, with only those posting four consecutive quarters of net positive earnings being accepted. The largest 500 of these stocks, measured by market capitalisation, are then weighted based on their daily standard deviation (volatility) over the last 180 trading days compared to the aggregate mean. The index is rebalanced every March and September.

The Compass EMP International High Dividend 100 Volatility Weighted Index adds a yield and value tilt to the volatility-weighted methodology. The index takes the top 100 dividend yielding companies from the International 500 Volatility Weighted Index. These constituents are then weighted based on their volatility.

The Compass EMP International 500 Volatility Weighted Index ETF (CIL) and the Compass EMP International High Dividend 100 Volatility Weighted Index ETF (CID) began trading on the Nasdaq Stock Market on 20 August 2015. They carry a gross expense ratio of 1.15% and a net expense ratio of 0.45%.

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