iShares, the world's biggest provider of
, is once again stuffing a number of products into the pipeline.
Just the other day, the company announced plans for value and
risk focused funds that target the U.S. market.
However, this doesn't appear to be the end of iShares' plans
as the company has just put out another filing on to the market.
This latest SEC filing
also targets the American market, but it looks to have a momentum
focus instead (see
iShares Files for Risk and Value Weighted
While a great deal of the key information was not made
available in the initial filing, there was some data released on
the index and how it looks to apply a momentum-based methodology
to the U.S. market. Below, we have highlighted some of these key
details on this in-registration product for investors curious as
to what iShares might be up to next for its fund lineup:
The proposed ETF looks to track the MSCI USA Momentum Index in
order to find top stocks that have strong momentum
characteristics. The focus is on price momentum over the previous
six months to one year period, utilizing daily returns to compute
Results are then standardized at +/- 3 standard deviations and
the z-scores are translated into momentum scores. Once this has
been accomplished, the top 100-150 stocks are chosen for
inclusion in the underlying index (read
Who Says iShares ETFs Aren't Cheap?
Investors should also note that weighting isn't purely market
cap-based but instead uses it as part of the weighting process.
The index takes the momentum score and multiplies it by the
free-float market cap in order to tilt towards high momentum
stocks in excess of their cap weighting.
The index looks to edge towards higher beta sectors, and away
from those with low beta like utilities and staples. Instead, the
fund looks to have a bias towards consumer discretionary,
financials, and tech companies.
With the departure of Russell from the passively managed ETF
world, the number of momentum focused ETFs was greatly curtailed.
However, there are still a few ETFs out there that utilize
momentum strategies for investors, any of which could pose as
foes for iShares' in-registration product (see
4 Best ETF Strategies for 2013
The most popular of the bunch is the
SPDR S&P 1500 Momentum Tilt ETF (
which is a low cost product targeting large and mid cap stocks.
The fund costs just 35 basis points a year in fees but has under
$9 million in AUM so it isn't exactly well-known by
Beyond that is
QuantShares' US Market Neutral Momentum Fund (
which is a bit more expensive at 99 basis points a year. However,
the product is arguably a more momentum-intensive fund, as it
goes long in high momentum stocks, and short in low momentum
stocks to get its exposure (see
Invest Like Morgan Stanley with These 5 Commodity
These two are among the biggest momentum-focused ETFs
currently on the market, so there clearly hasn't been much
appetite for the space as of now. This could change if iShares
can successfully bring its new concept to market though, so
investors will have to wait and see if the San Francisco-based
firm can break the trend and accumulate a decent amount of assets
in this underappreciated corner of the market.
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