Virtus launches US quality momentum ETF

Nov 20th, 2020 | By | Category: Equities

Virtus Investment Partners has launched a dual-factor US equity ETF that invests in large-cap US companies with strong quality characteristics and positive price momentum.

Virtus launches US quality momentum ETF

Joe Terranova, Chief Market Strategist, Virtus Investment Partners.

The Virtus Terranova US Quality Momentum ETF (JOET US) has listed on Nasdaq Exchange and comes with an expense ratio of 0.29%.

The fund has enjoyed an impressive start, seeing more than $50m in inflows on its opening day of trading.

According to Virtus, a quality momentum approach offers an intuitive balance of both offense and defense, capturing changing market dynamics and different investment cycles through a combination of fundamental and technical measures.

The fund tracks the Terranova US Quality Momentum Index and reflects the investment philosophy of Joseph M. Terranova, Senior Managing Director and Chief Market Strategist for Virtus.

Terranova said, “An essential component for building long-term growth is maintaining discipline and identifying high-conviction investment opportunities for portfolio allocation and diversification. Throughout my career, I have determined that high-conviction investment opportunities are rooted in both quality fundamental strength and positive technical momentum trends.”

The index construction methodology first screens the 500 largest US-listed equities and ranks them by positive price momentum, as defined in this instance by total return over the past 12 months. The 250 securities with the highest calculated momentum score form the selection universe.

Each of these 250 securities is then graded on three quality factors (return on equity, debt to equity, and annualized sales growth rate over the past three years), and ranked by its composite score. The 125 highest-ranking stocks form the final portfolio.

Constituents are equally weighted to enhance diversification, with the index rebalanced and reconstituted quarterly.

Terranova said, “The methodology behind the Terranova US Quality Momentum Index, which JOET follows, provides rules-based, systematic exposure to domestic large-cap companies exhibiting those quality and momentum characteristics. It also removes any emotion from the decision-making process in a modern market environment proliferated by algorithmic models and a widening gap between top-performing and bottom-performing companies.”

William Smalley, Executive Director of Virtus ETF Solutions, added, “We believe the opportunity to utilize Joe’s investment philosophy and expertise with the launch of the Virtus Terranova US Quality Momentum ETF delivers a compelling, core domestic equity strategy for the Virtus ETF suite. Investment professionals and investors will discover how JOET may serve as a differentiator for their respective portfolios.”

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