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Goldman Sachs Files for 2 New ETFs


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In the last couple of years, ETFs have witnessed surging popularity as they continue to grow and evolve. With a number of products being launched and fees being slashed, ETFs have grown more competitive over time, forcing issuers to foray into spaces where none has gone before.

Goldman Sachs, which has recently filed two new ETFs, Goldman Sachs Hedge Fund VIP ETF and Goldman Sachs High Sharpe Ratio ETF , will use the bank's own research reports , Hedge Fund Trend Monitor and U.S. Weekly Kickstart strategy report, respectively, as the basis of selection.

Let's dig a little deeper (see Total Market U.S. ETFs here ).

Proposed Funds in Detail

As per the SEC filing , the proposed Goldman Sachs Hedge Fund VIP ETF will track the performance of the Goldman Sachs Hedge Fund VIP Index. The Index provides exposure to equity stocks, which are expected to influence the long portfolios of hedge funds. These equity securities generally appear most frequently among the top ten equity holdings of U.S. hedge funds that select their positions based on fundamental analysis. The index comprises 50 securities with a market capitalization of approximately $2.5 billion to $7Array5.6 billion, as per the filing.

Meanwhile, Goldman Sachs High Sharpe Ratio ETF will track the performance of the Goldman Sachs High Sharpe Ratio Index, thereby providing exposure to large-cap U.S. stocks with the highest projected Sharpe ratio - a widely used measure of risk-adjusted return. The index comprises 50 securities with a market capitalization of approximately $4.2 billion to $2Array2.3 billion, as per the filing. The constituents of the index are equal-weighted with a 2% basket weight each. This is the first ETF to be constructed around the Sharpe ratio.

Both the funds are expected to be listed on the NYSE Arca. The expense ratio and the ticker code of the funds are yet to be disclosed.

How Does it Fit in a Portfolio?

The proposed Goldman Sachs Hedge Fund VIP ETF will be a good option for investors seeking high returns and who possess a healthy risk appetite. As per an Investopedia report , The Goldman Sachs Hedge Fund VIP Index has appreciated approximately 80% since mid-20Array2 while the S&P 500 was up approximately 5Array% in the period. Thus, the Hedge Fund VIP Index outperformed the S&P 500 even during a raging bull period. However, given the current bearish environment led by global growth worries, China turmoil and slump in oil prices , investors should be cautious (read: Best ETF Strategies to Survive Market Turmoil ).

Goldman Sachs High Sharpe Ratio ETF will be an innovative product providing risk-adjusted return with low concentration risk. The Sharpe ratio can be defined as excess return i.e. difference between asset return and risk free return for per unit of risk dominated by standard deviation. However, the Sharpe ratio is sometimes criticized as it does not differentiate between upside and downside deviation. Thus, it penalizes stocks for its potential to gain.

Although the filing did not state the fees the new ETFs will charge, it is expected that they will not be very high, considering Goldman's strategy of charging below-average fees for a number of ETFs including smart-beta ETFs. Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF ( GSLC ) launched in September 20Array5 has accumulated $300.8 million in its asset base and has an expense ratio of 0.09% (read: Can Goldman Dominate the Smart Beta ETF Industry? ).

ETF Competition

These new funds, if approved, could be interesting options for investors seeking a diversified exposure amid the current market turmoil. Goldman Sachs High Sharpe Ratio ETF doesn't have a direct contender. The fund would definitely get the first mover advantage, as it will be the first ETF in the space.

Meanwhile, Goldman Sachs Hedge Fund VIP ETF providing exposure to a niche market may face competition from other ETFs tracking hedge funds' stock holdings. Global X Guru ETF ( GURU ) is one of the popular ETFs in this space with an AUM of $ArrayArray9.7 million and trades in average volume of almost 40,000 per day. The fund has a high expense ratio of 0.75% and returned slightly almost Array0% so far this year.

Another ETF is this space is AlphaClone Alternative Alpha ETF ( ALFA ) with an AUM of $Array06.4 million. The fund trades in average volume of almost 44,000 per day. The fund has a high expense ratio of 0.95% and returned slightly almost 7% so far this year. So, the road ahead is definitely promising for the new ETF as it has potential to provide a lucrative option to investors (read: A Peek into Latest Array3-F Filing: Stocks & ETFs to Add ).

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GOLDMAN ACTBETA (GSLC): ETF Research Reports

GLBL-X GURU IDX (GURU): ETF Research Reports

ALPHACLN-ALT AL (ALFA): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , ETFs
Referenced Symbols: GSLC , GURU , ALFA



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