The nine SPDR MSCI funds seek to combine the performance of quality, value and low volatility strategies to provide the potential diversification benefits of a multi-factor approach in an objective, transparent and consistent manner, the firm said in a statement.
Advanced beta, also known as alternative or smart beta, refers to a set of approaches that deviate from the traditional cap-weighted model and instead weight indices or securities based on alternative rules-based methodologies. According to a recent SSgA study titled, “Beyond Active and Passive, Advanced Beta Comes of Age,” 65% of institutional investors from North America and Europe are planning to adopt multi-factor advanced beta strategies, and nearly 70% agree that combining several targeted market exposures as part of an advanced beta offering makes for a more refined product (see “Institutions Like Smart Beta”). A survey from Cogent Research indicates more institutional investors are using smart beta exchange-traded funds (ETFs), many in an effort to reduce portfolio volatility (see “Smart Beta ETFs Can Be Used to Reduce Volatility”).
The ETFs, trading on the New York Stock Exchange Arca as of June 12, are all SPDR MSCI: World Quality Mix ETF (QWLD); EAFE Quality Mix ETF (QEFA); Emerging Markets Quality Mix ETF (QEMM); Australia Quality Mix ETF (QAUS); Canada Quality Mix ETF (QCAN); Germany Quality Mix ETF (QDEU); Japan Quality Mix ETF (QJPN); Spain Quality Mix ETF (QESP); and United Kingdom Quality Mix ETF (QGBR). All feature an expense ratio of .30%.
Advanced beta strategies are a valuable tool in today’s market, as they blend both passive and active investment styles, according to James Ross, executive vice president and global head of SPDR Exchange Traded Funds at State Street Global Advisors. “Our new SPDR MSCI Quality Mix ETFs use multi-factor strategies constructed by combining three MSCI Factor Indices with different risk-return profiles and correlations,” Ross says.
Multi-factor is appealing to investors because of the opportunity to manage risk through combined factor tilts and potentially enhance the resilience of their portfolio through strategic exposure, Ross explains.
Designed to represent the performance of quality, value and low volatility factor strategies across global markets in a single composite index, the MSCI Quality Mix Indexes are an equal weighted combination of the MSCI Value Weighted, MSCI Minimum Volatility and MSCI Quality Indexes.
More information about the advanced beta SPDR ETFs and the MSCI Quality Mix Index methodology is at SSgA’s website.