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
Goldman Sachs High Sharpe Ratio ETF
, will use the bank's own
, 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
, 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
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
, 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
, 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
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 (
) 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
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 (
) 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 (
) 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
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ALPHACLN-ALT AL (ALFA): ETF Research Reports
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