VictoryShares launches US minimum volatility ETF

Jun 22nd, 2017 | By | Category: Equities

Ohio-based asset manager Victory Capital has launched the VictoryShares US Multi-Factor Minimum Volatility ETF (Nasdaq: VSMV), giving exposure to US equities while tilting the portfolio towards a series of factors that historically have provided superior risk-adjusted returns.

VictoryShares launches US minimum volatility ETF

The VictoryShares US Multi-Factor Minimum Volatility ETF provides exposure to momentum, quality, value and growth factors while minimizing portfolio volatility through an optimization weighting process.

The ETF tracks the Nasdaq Victory US Multi-Factor Minimum Volatility Index, developed in partnership between Victory Capital and Nasdaq. The index employs a two-step approach that aims to deliver superior risk-adjusted equity returns, while potentially minimizing overall expected volatility relative to the US broad market. Step one screens for more durable companies by isolating certain characteristics such as momentum, quality, value and growth potential, and step two optimizes the portfolio to ensure diversification and to help reduce overall index volatility.

Mannik Dhillon, President, VictoryShares and Solutions, commented: “We believe our two-step approach improves upon the process used by other minimum volatility ETF offerings available today. We use a multi-factor approach to select a starting universe that has the potential to enhance returns and then optimize the portfolio with the aim of reducing volatility. Many minimum volatility strategies focus only on the latter step.”

The fund’s largest sector exposures are to financials (18.0%), industrials (14.2%), consumer discretionary (11.0%), information technology (16.4%) and health care (10.3%). There are 62 individual holdings of which the largest are Apple (5.1%), Microsoft (4.3%) and Johnson & Johnson (4.1%).

It has a total expense ratio (TER) of 0.35% due to a contractual fee waiver in place until at least October 2018. Its gross expense ratio is 0.71%.

VSMV is the second in a series of new VictoryShares ETFs that track indices developed with Nasdaq. The VictoryShares Dividend Accelerator ETF (Nasdaq: VSDA), which launched in April 2017 and tracks the Nasdaq Victory Dividend Accelerator Index, seeks to target companies that are more likely to grow dividends consistently over time.

The index methodology selects 75 companies from the parent Nasdaq US Large Mid Cap Index based on 15 factors designed to measure the firm’s dividend quality: dividend yield, net income stability (10 years), return on equity, sales stability, return on invested capital, return on equity trend, pre-tax income to debt, cash to market value, dividend consistency, price volatility, trailing P/E, size, gross margin,  years of continuous dividend growth, and net income stability (5-years). To be eligible for inclusion, firms must also have increased dividends for a minimum of five consecutive years.

The fund’s TER is also 0.35% due to a contractual fee waiver in place until at least October 2018. Its gross expense ratio is 0.71%.

“Nasdaq is committed to creating powerful index strategies and methodologies that help investors achieve key outcomes, such as lowering portfolio volatility,” said Dave Gedeon, vice president and head of research & development at Nasdaq Global Indexes. “We are pleased to partner with VictoryShares to bring a next generation approach to minimum volatility investing to the marketplace.”

The VictoryShares ETF platform has approximately $1.5 billion in AUM.

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