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Recent Quantitative ETFs Contend Against Established Favorites

David Fabian

Investors seeking stocks with deep value relative to their peers have typically used sophisticated screening methods and other tools to discover these hidden gems.

However, a new ETF from an upstart fund provider seeks to use quantitative analysis to build a portfolio of value-oriented stocks from the ground up.

New Quantitative ETF: QVAL

The ValueShares U.S. Quantitative Value ETF (QVAL) debuted last week on the BATS exchange as the initial offering from Alpha Architect. This actively-managed fund seeks long-term capital appreciation by investing in U.S. equities that the adviser believes are undervalued.

QVAL uses a number of balance sheet statistics to screen for stocks with indications of financial strength, yet have low share prices in relation to operating earnings and other equity valuation metrics. QVAL has a concentrated portfolio of 40 underlying holdings across a multitude of sectors and market caps.

Related Link: ValueShares Launches U.S. Quantitative Value ETF QVAL

QVAL Joining Another Recent ETF

This new actively-managed ETF will compete with another recent entry with WBI Large Cap Tactical Value Shares (NYSE: WBIF), which has raised more than $90 million in assets over the last two months since its inception. WBIF also uses quantitative models to select stocks with value characteristics and then employs a unique stop loss methodology across every underlying holding.

The goal of both these active strategies is to outperform a more established index such as the iShares Russell 1000 Value Index (ETF) (NYSE: IWD) or Vanguard Value ETF (NYSE: VTV), both of which are leaders in the category.

Passive value indexes typically select their holdings from a broader universe of stocks based on a statistic such as price-to-book ratio. 


As a result of the additional expertise in research and security selection, both funds charge a higher expense ratio than a traditional passively managed index. WBIF charges a gross expense ratio of 1.00 percent, while QVAL is listed at 0.79 percent.

Time Will Tell

We will have to wait for more history to develop on both of these new ETFs before an accurate analysis can identify whether or not these quantitative screens are outperforming a traditional value benchmark. However, both funds show unique characteristics that may enhance long-term results or lower overall volatility.

It's also worth noting that Alpha Architect is working on an international version of their strategy as a complimentary offering in the future.

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