Goldman Sachs Asset Management (GSAM) has expanded its suite of ‘ActiveBeta’ multi-factor ETFs with the introduction of a global low volatility fund.
Goldman Sachs has added a global low volatility fund to its suite of ActiveBeta multi-factor ETFs.
The Goldman Sachs ActiveBeta World Low Vol Plus Equity ETF (GLOV US) has been listed on Cboe BZX Exchange with an expense ratio of 0.25%.
The fund tracks the Goldman Sachs ActiveBeta World Low Vol Plus Equity Index which seeks to offer the risk reduction associated with low volatility stocks while also providing exposure to additional factors linked to long-term outperformance.
The first step in the index’s construction process involves creating the global low volatility index. This is achieved in two steps.
In the first step, the methodology equally combines two global equity indices: a market-cap-weighted index of large and mid-cap stocks from developed market countries and an index of the same stocks equally weighted within their country-specific sectors (e.g., US financials).
In the second step, constituent weights in this combined index are adjusted according to their exposure to the low volatility factor (determined by share price volatility over the past 12 months).
The methodology then applies GSAM’s ActiveBeta approach which systematically exploits three well-established equity factors – value, momentum, and quality – in a bid to provide higher returns at similar or lower levels of risk relative to the global low volatility index.
The construction process also involves two steps. In the first step, three sub-indices, one for each factor, are created from the global low volatility index. This is similarly done by overweighting or underweighting securities according to their factor ranks.
In the second step, the three sub-indices are combined equally with offsetting positions calculated and netted off, subject to weight constraints to control industry group biases. Constituents with final weights below a certain threshold are eliminated.
The index is rebalanced quarterly but existing constituents are allowed to deviate either side of their target weights within a range to reduce portfolio turnover.