Victory Capital unveils smart beta emerging markets ETF

Mar 31st, 2016 | By | Category: Equities

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A new exchange-traded fund offering smart beta exposure to emerging market companies has launched on Nasdaq exchange. The Victory CEMP Emerging Market Volatility Wtd Index ETF (CEZ), screens stocks across factors such as size (large cap) and fundamentals (profitability) and weights eligible constituents according to their historical volatility. The new ETF is managed by Victory Capital’s CEMP investment franchise (formerly “Compass EMP”).

Stephen Hammers Victory Compass

Stephen Hammers, Chief Investment Officer for Victory’s CEMP franchise.

The new ETF tracks the performance of the CEMP Emerging Market 500 Volatility Weighted Index, which aims to capture certain factors that have historically contributed to superior risk-adjusted returns compared to broad market investing.

The index universe begins with all international common stocks domiciled in countries defined as emerging markets then screens consistent net positive earnings for four consecutive quarters. From the remaining securities, the 500 stocks with the largest market capitalisations are selected for final inclusion. The remaining 500 stocks are then weighted based on their daily standard deviation (volatility) over the last 180 trading days, compared to the aggregate mean. Country caps of 20% are also applied. The index is reconstituted every March and September.

Stephen Hammers, Chief Investment Officer for Victory’s CEMP franchise, said “Emerging markets account for a larger share of the global economy than they have in the recent past and represent a great investment opportunity… We are very excited to expand our existing ETF line-up to include a fund that may offer a risk conscious and tax efficient solution for investors seeking to diversify their portfolios through exposure to emerging markets.”

As of 29 February 2016, the index had significant exposure to Taiwan (11.9%), China (11.5%), South Korea (9.7%), India (9.5%) and Malaysia (8.7%). A total expense ratio of 0.50% applies.

The new fund complements Victory Capital’s existing suite of smart beta ETFs which target a variety of US and international exposures. These include:
Victory CEMP International Volatility Wtd Index ETF (CIL)
Victory CEMP International High Div Volatility Wtd Index ETF (CID)
Victory CEMP US Large Cap High Div Volatility Wtd Index ETF (CDL)
Victory CEMP US Small Cap Volatility Wtd Index ETF (CSA)
Victory CEMP US Small Cap High Div Volatility Wtd Index ETF (CSB)

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