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New Factor ETFs Flex Their Muscles


Over 150 new exchange traded products have come to market this year and as par for the course with new ETFs, some have immediately been successful while others have struggled out of the gates.

Of this year’s group of new ETFs, S&P Capital IQ has “an Overall Ranking of Overweight on 16 of the 85 equity ETFs, including four with a recent market capitalization of more than $100 million,” said the research firm in a new note.

That group includes three factor-based ETFs courtesy of iShares that debuted in April – the iShares MSCI USA Momentum Factor ETF (MTUM) , iShares MSCI USA Size Factor ETF NYSEArca: SIZE) and iShares MSCI USA Value Factor ETF (VLUE) . Each was developed at the request of the Arizona State Retirement System, which seeded each ETF with $100 million. [iShares Enters Actively Managed ETF Arena]

Having $100 million in the coffers right out of the gate helps any ETF, but MTUM has really stood on their own merits, accumulating $191.4 million in assets, respectively. MTUM rank among this year’s most successful new launches. SIZE has $120.1 million in AUM. [These New ETFs Have Rapidly Gained Assets]

The iShares MSCI USA Quality Factor ETF (QUAL) , which also garners an overweight rating from S&P  Capital IQ, is easily one of this year’s most successful new launches with $257.5 million in assets.

QUAL holds 126 “quality stocks based on fundamentals (high return on equity, stable year-over-year earnings growth and low financial leverage),” according to iShares.

Apple (AAPL), Google (GOOG) and Exxon Mobil (XOM) combine for about 15.6% of QUAL’s weight. QUAL is up 11.5% since its July debut.

Each of those four ETFs has an annual expense ratio of 0.15%. Some new bond ETFs have also done well right off the bad, no small feat in what has been a turbulent year for bond ETFs due to surging Treasury yields.

“Among 31 taxable and two tax-free fixed income ETFs launched in 2013, we have an Overall Ranking of Overweight on six,” said S&P Capital IQ in the note.

That group includes the iShares Short Maturity Bond ETF (NEAR) , which debuted in late September and already has nearly $168 million in assets under management. Although NEAR has a 30-day SEC yield of just 1.06%, the  fund has an effective duration of less than a year, meaning its sensitivity to rising rates is minimal. [Don't Fear the Fed With These ETFs]

 iShares MSCI USA Quality Factor ETF

Tom Lydon’s clients own shares of Apple and Google.