iShares launches factor ETF series

Oct 7th, 2014 | By | Category: Equities

iShares, the exchange-traded fund franchise of BlackRock, has unveiled a series of “factor” ETFs designed for investors seeking to express more distinct views on specific drivers of risk and return.

iShares launches factor ETF series

Factor ETFs offer targeted exposure to factors that have historically provided enhanced risk adjusted returns.

The funds, which have been listed on the London Stock Exchange and Deutsche Börse, further expand BlackRock’s “smart beta” offering, targeting sources of return which cannot be isolated through traditional market capitalisation weighted indices.

Each fund provides access to global equity markets and seeks to offer targeted exposure to a specific factor that has historically provided enhanced risk adjusted returns: value, size, quality and momentum.

Through these funds investors are able to express factor views throughout the business cycle.  They can be used as part of a broad portfolio to diversify portfolio risk or used as niche exposures aiming to boost portfolio performance.

The funds complement iShares’ existing suite of smart beta ETFs, which includes a minimum volatility factor range that aims to provide broad, diversified market exposures with reduced volatility.

The new factor ETFs are based on indices provided by MSCI.

Sara Shores, Global Head of Smart Beta for BlackRock, commented: “Our smart beta strategies are simply the next step in the 40 year evolution of passive investing at BlackRock. Through the iShares Factor ETFs, investors can now access sources of potential additional return in a passively implemented portfolio. Complementing our minimum volatility products, our new factor funds allow investors to emphasise specific, high conviction investment views or construct a broadly diversified portfolio along factor dimensions with the goal of outperforming the broad equity market.”

Deborah Yang, Head of MSCI’s index business in EMEA and India, added: “We are delighted to license an innovative set of MSCI factor indexes to iShares for their new ETF factor series. Built on a solid research framework and leveraging 40 years of factor expertise, MSCI’s family of factor indexes has been widely adopted by investors, with over $100 billion currently benchmarked to them.”

The funds are physically replicating and are competitively priced, each with a total expense ratio of 0.30%, and are as follows:

iShares MSCI World Value Factor UCITS ETF
Provides exposure to a sub-set of MSCI World stocks that capture undervalued stocks based on their fundamentals.

iShares MSCI World Size Factor UCITS ETF
Provides exposure to smaller capitalisation companies within the MSCI World investment universe.

iShares MSCI World Momentum Factor UCITS ETF
Provides exposure to a sub-set of MSCI World stocks that have recently outperformed on a risk-adjusted basis.

iShares MSCI World Quality Factor UCITS ETF
Provides exposure to a sub-set of MSCI World stocks with strong balance sheets and stable earnings.

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