Goldman’s US multifactor ETF attracting sizable inflows

Aug 19th, 2019 | By | Category: Equities

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The Goldman Sachs ActiveBeta US Large Cap Equity ETF (GSLC US) is proving popular with investors, having gathered over $1.4 billion in net inflows since the start of July.

Goldman Sach’s US multifactor ETF attracting sizable inflows

The Goldman Sachs ActiveBeta US Large Cap Equity ETF has recorded over $1.4bn in net inflows since the start of July.

The inflows, which consist of $1.03bn in July and a further $393 million in August month to date (16 August 2019), have helped swell the fund’s assets.

Assets under management now stand at more than $6.4bn – an impressive amount for a fund less than four years old – and are up 75% year to date.

The fund’s success can be attributed to its underlying strategy, a competitive price tag, and the strength of the Goldman Sachs brand and distribution capability.

At just 0.09%, the fund provides a similarly priced alternative to funds such as SPY for investors who wish to gain US large-cap equity exposure but prefer a more sophisticated approach to traditional market-cap-weighted tracker funds.

The ETF is linked to the Goldman Sachs ActiveBeta US Large Cap Equity Index which applies a proprietary multifactor methodology to the parent Solactive US Large Cap Index – a universe broadly similar to the S&P 500. The strategy aims to target returns attributable to four well-established drivers of outperformance: value, momentum, quality, and low volatility.

The methodology constructs four sub-indices, one for each of the factors. Each sub-index consists only of those stocks with adequate exposure to the relevant factor, and constituents within each sub-index are weighted by their factor scores. Once these sub-indices are formed, the final index is created as an equally weighted allocation to each sub-index.

The fund’s success mirrors a trend seen more broadly, namely the growing adoption of smart beta products and a preference for multifactor solutions.

According to research from index provider FTSE Russell from June 2019, smart beta adoption amongst institutional asset owners globally has reached a record high of 58%, ten percentage points higher than 2018. North American asset owners are showing the fastest growth in uptake, increasing their adoption rate by 18 percentage points over the past year.

The research also shows that multifactor strategies are the most in-demand with users of the strategy increasing from 49% in 2018 to 71% in 2019. Uptake has more than tripled since 2015.

One of the reasons behind the popularity of multifactor strategies is that they have demonstrated an ability to offer smoother, market-like returns with the potential for some outperformance over the long-term, unlike single-factor strategies, which can go through periods of significant underperformance depending on the stage of the economic cycle.

In addition to the US large-cap fund, Goldman Sachs offers ActiveBeta funds targetting US small-cap, international developed, European, Japanese, and emerging market equity universes.

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