Iowa-based investment manager Principal Financial has launched two smart beta exchange-traded funds that offer exposure to large- and mid-cap US companies with significant pricing power and sustainable shareholder yield. The funds have been listed on the Nasdaq exchange.
The two newly launched Principal Financial ETFs are designed to provide smart beta exposure to large- and mid-cap US companies.
The Principal Price Setters Index ETF (PSET) tracks the Nasdaq US Price Setters Index, a reference for US companies that have substantial pricing power – the ability to pass through rising costs without sacrificing customers. The top 150 constituents are chosen from the Nasdaq US Large Mid Cap Index based on an average score from 11 factors which include general profitability metrics such as return-on-equity or earnings-per-share growth, as well as more specific measures of pricing power such as the standard deviation of the seven year operating margin. The index has historically offered a hedge against inflation and has performed well during times of heightened market stress.
As of 21 March 2016, the fund has significant exposure to the industrials (25.4%), financials (16.6%), consumer goods (16.4%), consumer services (12.2%) and healthcare (10.8%) sectors. A total expense ratio of 0.40% applies.
The Principal Shareholder Yield Index ETF (PY) utilizes the same selection universe but targets companies that have exhibited strong shareholder yield, which includes dividend payments and stock buybacks. Dividends and buybacks are explicit and implicit methods in which a company can return cash to their shareholders; the Nasdaq US Shareholder Yield Index combines those factors with additional cash flow criteria to ensure not only that the securities in the index are great historical yield producers, but also positioned to continue to maintain those attractive yields moving forward.
As of 21 March 2016, the fund has significant exposure to the financials (27.3%), industrials (18.0%), consumer services (13.6%), consumer goods (12.2%) and technology (11.5%) sectors. The fund charges an all in annual fee of 0.40%.