With much of the traditional beta space already populated, more exchange traded fund providers are engineering passive products that follow active styles. For instance, ALPS recently launched a suite of ETFs based on Goldman Sachs’ Proprietary Indices that allocate based on market volatility.
On Wednesday, ALPs added three new ETFs based on the “GS Momentum Builder” that provides exposure to select asset classes or markets with a hedge against volatility. The provider also launched a broad low-volatility type ETF as well, according to a press release.
“This collaboration helps us achieve our shared goal of providing ETF investors with thoughtful index-based investment alternatives with various types of market exposures,” Federico Gilly, managing director and head of the Equity sales Strats and Structuring Group at Goldman Sachs, said in the press release.
The new ETFs include:
- ALPS/GS Momentum Builder Growth Markets Equities and U.S. Treasuries Index ETF (GSGO)
- ALPS/GS Momentum Builder Multi-Asset Index ETF (GSMA)
- ALPS/GS Momentum Builder Asia ex-Japan Equities and U.S. Treasuries Index ETF (GSAX)
- ALPS/GS Risk-Adjusted Return U.S. Large Cap Index ETF (GSRA)
The Momentum Builder series of ETFs include holdings that provide the highest six-month historical returns. However, unlike traditional momentum strategies, these ETFs will also take into account historical volatility and correlation as a way to manage risk. If the 3-month realized volatility exceeds the volatility cap, the index will partially reallocate to cash – the funds are rebalanced monthly. Each of these ETFs have a 0.68% expense ratio.
GSGO’s index allocations include iShares MSCI Mexico Investable Market Index Fund (EWW) 30%, iShares MSCI South Korea Index Fund (EWY) 10%, iShares FTSE/Xinhua China 25 Index (FXI) 30% and iShares MSCI Turkey Investable Market Index Fund (TUR) 30%.
GSMA’s index allocations include PowerShares DB Gold Fund (DBB) 0.8%, iShares MSCI EAFE Index Fund (EFA) 30%, WisdomTree Emerging Markets Local Debt Fund (ELD) 30%, iShares JPMorgan USD Emerging Markets Bond Fund (EMB) 30%, iShares iBoxx $ High Yield Corporate Bond Fund (HYD) 4.5% and iShares Barclays 20+ Year Treasury Bond Fund (TLT) 4.7%.
GSAX’s index allocations include iShares MSCI Australia Index Fund (DBB) 30%, iShares MSCI Hong Kong Index Fund (EWH) 30%, iShares MSCI Singapore Index Fund (EWS) 10% and iShares MSCI Thailand Investable Market Index Fund (THD) 30%.
GSRA hold U.S. stocks from the Russell 1000 Index that have the highest risk-adjusted returns using a 12 month target and holds sectors with lower anticipated risk with a higher weighting. The ETF has a 0.55% expense ratio.
The Risk-Adjusted Return U.S. Large Cap Index ETF’s allocations include consumer discretionary 10%, consumer staples 14%, energy 8%, financials 10%, health care 14%, industrials 10%, materials 8%, technology 10% and utilities 16%.
For more information on new product launches, visit our new ETFs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.