Principal launches mega-cap low-vol ETF

Oct 17th, 2017 | By | Category: Equities

Iowa-headquartered investment manager Principal Financial has launched a new smart beta ETF tracking the performance of US mega-cap equities with a tilt toward lower volatility stocks.

Principal launches US mega-cap low-vol ETF

Paul Kim, managing director of ETF strategy at Principal Global Investors.

The Principal US Mega-Cap Multi-Factor Index ETF (Nasdaq: USMC) tracks the Nasdaq US Mega Cap Select Leaders Index, composed of the largest US companies in the Nasdaq US Large Cap Index. Selected constituents are then weighted according to a proprietary algorithm created by Principal and Nasdaq which seeks to lower the overall volatility of the index. The ETF will be managed by Principal Global Investors.

Paul Kim, managing director of ETF strategy at Principal Global Investors, commented: “Everyone likely has domestic large-cap equity exposure. USMC provides a more efficient way to get that exposure with potentially better risk-adjusted returns. This launch reflects our commitment to meeting the current and future needs of our clients and to continuing to grow our ETF platform. We’re focused on continuing to expand our suite of equity smart beta funds, leveraging our expertise as an active manager.”

According to Principal, mega-cap companies may suit investors looking for resilience through a full market cycle due to their global scale and strong brand recognition. Proponents of mega-cap stocks note that these firms’ business models have generally demonstrated long-term growth, and the companies have historically distributed more than one-third of their earnings every year to shareholders, highlighting their potential as income-generating assets.

USMC has a total expense ratio (TER) of 0.12% due to a contractual fee waiver in place until at least 31 October 2018. Its gross expense ratio is 0.15%.

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