Nationwide adds emerging markets to smart beta ETF line-up

Mar 28th, 2018 | By | Category: Equities

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Nationwide, a Columbus, Ohio financial services firm, has expanded the firm’s range of smart beta ETFs with the launch of the Nationwide Maximum Diversification Emerging Markets Core Equity ETF (MXDE US) on NYSE Arca.

Smart beta ETF launch

The new fund brings the total number of Nationwide smart beta ETFs to four.

The new fund comes on the back of three launches in September 2017 which marked Nationwide’s entrance into the ETF space.

MXDE tracks the TOBAM Maximum Diversification Emerging Markets Index, from Paris-base quantitative investment specialists TOBAM, which provides exposure to mid- and large-cap companies in emerging markets.

The universe of securities is passed through an environmental, social and governance (ESG) screen to filter out companies that do not meet the criteria for socially responsible investing.

The remaining securities are then weighted using a quantitative model to maximize the portfolio’s diversification ratio – a proprietary metric based on the volatility of each index constituent and its correlation to the other index constituents.

The index is rebalanced on a quarterly schedule.

“The Nationwide Maximum Diversification Emerging Markets Core Equity ETF seeks to identify the exact combination of stocks within the emerging markets universe that will maximize the diversification benefits of a portfolio while retaining the full equity risk premium,” said Chris Graham, chief investment officer for Nationwide Funds.

“In other words, by building portfolios which seek to minimize idiosyncratic risk exposure from specific stock, sector, factor or country bets, this fund is expected to deliver higher risk-adjusted returns.”

The fund has an expense ratio of 0.64%.

It is the second maximum diversification ETF offered by Nationwide, complementing the US-focused Nationwide Maximum Diversification US Core Equity ETF (MXDU US) (expense ratio 0.34%), which has pulled in assets under management of more than $100 million.

The other two funds in Nationwide’s stable of ETFs are equally risk-weighted strategies tracking US and global ex-US equities. Each also has AUM above $100m.

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