Wide Moat ETF outperforms S&P 500 by 10% YTD

May 6th, 2016 | By | Category: Equities

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The VanEck Vectors Morningstar Wide Moat ETF (MOAT), has outperformed the S&P 500 Index by more than 10% year-to-date (30 April 2016), based on net asset value returns.

VanEck Vectors Morningstar Wide Moat ETF enjoys strong start to 2016

The VanEck Vectors Morningstar Wide Moat ETF (MOAT), has outperformed the S&P 500 Index by more than 10% year-to-date (30 April 2016), based on net asset value returns.

The ETF tracks the Morningstar Wide Moat Focus Index which consists of the 20 most attractively priced companies (lowest ratios of stock price to fair value) with sustainable competitive advantages as determined by Morningstar.

The term ‘economic moat’ was coined by Warren Buffett to classify firms which have established competitive advantages (through possible avenues such as brand loyalty, high switching costs, network effects, regulatory protection or economies of scale).

VanEck notes that much of the outperformance delivered by MOAT this year has stemmed from stocks in the industrials, consumer discretionary, and information technology sectors. “In late March, the index rotated out of many of its top performing names to reallocate to stocks with more attractive valuations according to Morningstar,” said Brandon Rakszawski, ETF Product Manager at VanEck.

As a result of the March index review, healthcare stocks became the largest sector component in MOAT, indicating attractive relative valuations in that space at the time. As such, MOAT was well positioned to capture a rebound in healthcare stocks as they became one of the better performing sectors in the S&P 500 Index in April.

“While the short-term performance of MOAT is strong, just as notable is the long-term track record of its underlying wide moat index strategy,” continued Rakszawski. “MOAT’s underlying index has, in fact, outperformed the S&P 500 Index by more than 400 basis points on an annualized basis from the launch of MOAT’s index on 14 February 2007 through 30 April 2016.

A sister fund to MOAT, the VanEck Vectors Morningstar International Moat ETF (MOTI), which applies the same Morningstar methodology to non-US firms, was launched last year.

MOTI tracks the Morningstar Global ex-US Moat Focus Index which provides exposure to 50 attractively priced companies with sustainable competitive advantages according to Morningstar. MOTI has also posted strong performance this year, with 3.95% year-to-date (30 April 2016) based on NAV returns, compared to a return of 2.25% for the MSCI ACWI ex USA Index.

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