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This article was originally published on ETFTrends.com.
The universe of multi-factor exchange traded funds continues growing, but some funds are already separating themselves from the pack. That includes the WisdomTree U.S. Multifactor Fund (Cboe: USMF) .
The U.S. Multifactor Fund tries to reflect the performance of the WisdomTree U.S. Multifactor Index, which is generally comprised of 200 U.S. companies screened for fundamental factors value and quality, along with technical factors momentum and correlation.
“We are pleased to announce that after one year of live performance, USMF outperformed all 10 of these multifactor ETFs on both an absolute and risk-adjusted basis,” said WisdomTree in a note out Tuesday. “In fact, of these 10 ETFs, USMF exhibited the third lowest volatility, with the two lower-volatility ETFs achieving their risk reduction at the cost of being the worst two in performance.”
An Impressive Start for USMF
USMF debuted in late June 2017 and now has over $10 million in assets under management.
Value is determined by fundamental valuation ratios, such as price-to-book, price-to-sales, price-to-earnings. Quality is determined by profitability ratios and the growth of these ratios over time, including return on equity and return on assets. Momentum is determined by a stock’s risk adjusted returns over multiple periods of time. Lastly, correlation is defined as each company’s correlation with a broad market index.
The ETF is home to nearly 200 stocks, none of which exceed weights of 1.38%. Technology is USMF's largest sector weight at 26.05% while the healthcare and financial services sectors combine for 28.60% of the fund's roster.
Importantly, USMF highlights the advantages of using metrics beyond sheer size and market value in stock selection.
“However, USMF has shown over the past year that allocating more money to a company simply because it’s larger doesn’t have to be the status quo. In fact, at a time when those companies generally have been outperforming, USMF has still beat the market by over 3.5%, as well as the majority of other multifactor ETFs beyond just the top 10, as measured by assets under management,” according to WisdomTree.
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