Goldman Sachs Asset Management has expanded its ‘MarketBeta’ suite of low-cost, core portfolio ETFs with two new funds providing exposure to US large-cap stocks that are either growth- or value-oriented.
Goldman Sachs’ MarketBeta ETFs are designed to deliver core portfolio exposures at a low cost.
The Goldman Sachs MarketBeta Russell 1000 Growth Equity ETF (GGUS US) and Goldman Sachs MarketBeta Russell 1000 Value Equity ETF (GVUS US) have been listed on NYSE Arca.
Each fund comes with an expense ratio of just 0.12%.
Methodology
GGUS and GVUS are linked to the Russell 1000 Growth 40 Act Daily Capped Index and Russell 1000 Value 40 Act Daily Capped Index, respectively.
Each index is constructed from the large and mid-cap Russell 1000 Index universe which consists of approximately the largest 1,000 companies listed and domiciled in the US.
To create its style indices, index provider FTSE Russell employs a multi-variable approach, using book-to-price, I/B/E/S forecast medium-term growth, and historical sales per share growth to determine whether a company is part of the growth or value investment universe.
Stocks that are determined to be ‘fully growth’ or ‘fully value’ are assigned directly to their appropriate index. Meanwhile, stocks that possess combinations of both growth and value characteristics may be allocated to both indices.
Each index weights its constituents by market capitalization, while those stocks with both growth and value characteristics are proportionally represented in both indices based on their style tilt – for example, a growth-leaning stock that is represented at 80% of its market cap weight in the Russell 1000 Growth Index will be represented at 20% of its market cap weight in the Russell 1000 Value Index.
Additionally, the indices are designed in consideration of the definition of a “Diversified Company” according to the Investment Company Act of 1940. Specifically, an aggregate cap of 22.5% is also applied to all companies with weights greater than 4.5%. The index is monitored daily to ensure that constituent weights do not breach 1940 Act thresholds.
Each index is fully reconstituted annually to ensure it remains representative of stocks with growth or value characteristics.
The new Goldman Sachs MarketBeta ETFs will act as direct challengers to two colossal style-oriented funds offered by BlackRock – the $77 billion iShares Russell 1000 Growth ETF (IWF US) and the $52bn iShares Russell 1000 Value ETF (IWD US) – which are priced seven basis points higher at 0.19% each.
Investors seeking style-oriented US large-cap equity exposure may also wish to consider the $170bn Vanguard Growth ETF (VUG US) and $140bn Vanguard Value ETF (VTV US) which come with ultra-low expense ratios of just 0.04% each. These funds are linked to CRSP US Large Cap Growth and Value Indices which are designed to offer more focused style exposures – the CRSP growth index currently contains 216 constituents (compared to 442 for the Russell 1000 Growth) while the CRSP value index comprises 336 (compared to 848 for the Russell 1000 Value).