First Asset rolls out tactical rotation, low vol and multi-factor ETFs

Oct 18th, 2016 | By | Category: Equities

Canadian investment manager and exchange-traded fund issuer First Asset has launched three new ETFs on the Toronto Stock Exchange: the First Asset US Tactical Sector Allocation Index ETF (FUT); the First Asset Canadian Dividend Low Volatility Index ETF (FDL) and the First Asset US Equity Multi-Factor Index ETF (FUM).

First Asset rolls out tactical rotation, low vol and multi-factor ETFs

Barry Gordon, President and CEO of First Asset.

Each ETF follows a proprietary rules-based index developed by CIBC Capital Markets, a leading provider of quantitative index strategies in Canada and the United States.

Barry Gordon, President and Chief Executive Officer, First Asset, commented: “We are pleased to extend these additional three CIBC Equity Index Strategies to retail investors through First Asset ETFs. Last month we launched the First Asset Canadian Buyback ETF (FBE) and the First Asset US Buyback ETF (FBU). This is a unique opportunity for investors to benefit from a range of quantitative indices designed by one of Canada’s leading index strategy teams, while also enjoying the benefits of the ETF structure, including transparency, tax efficiency, liquidity and low cost.”

Multi-factor

The First Asset US Equity Multi-Factor Index ETF tracks US companies with low beta (low sensitivity to market fluctuations), quality (high profitability and low leverage ratios), and value (low price-to-earnings and price-to-book ratios) characteristics.

As of 12 October 2016 the largest sector exposures are to financials (27.0%), consumer discretionary (23.4%), consumer staples (23.2%), and industrials (10.0%).

Using back-tested data from May 2005, the underlying CIBC US Equity Multi-Factor Index has shown an annualized return of 12.4% with a standard deviation of 14.6%, compared to the S&P 500 Index, which has returned 7.6% per annum with a standard deviation of 14.3%. This has resulted in a significantly superior Sharpe ratio of 0.94 compared to 0.59 for the benchmark.

Source: First Asset.

Source: First Asset.

The ETF has a total expense ratio (TER) of 0.60%.

Low Volatility

The First Asset Canadian Dividend Low Volatility Index ETF tracks Canadian firms with low beta and high dividend yield characteristics.

The largest sector exposures are to real estate (45.5%), telecoms (19.9%), financials (9.9%) and utilities (9.8%).

Using back-tested data from June 2005, the underlying CIBC Canadian Dividend Low Volatility Index has shown an annualized return of 9.3% with a standard deviation of 9.5%, compared to the S&P/TSX Composite TR Index, which has returned 7.1% per annum with a standard deviation of 13.3% over the same period. This has resulted in a significantly superior Sharpe ratio of 0.80 compared to 0.45 for the benchmark.

Source: First Asset.

Source: First Asset.

The ETF has a TER of 0.55%.

Tactical Rotation

The First Asset US Tactical Sector Allocation Index ETF is a fund-of-funds investing in ETFs selected to allocate portfolio exposure among various US equity sectors. The methodology provides exposure up to nine US equity sector ETFs when their momentum is positive, but rebalances into short- and mid-term fixed income ETFs (up to 100%) when the equity sectors are exhibiting negative momentum. Each holding receives an equal weighting in the fund upon any rebalance.

As of 19 October 2016 the ETF is invested in the technology, materials, industrials, financials, energy, consumer discretionary and healthcare sectors.

Using back-tested data from October 2005, the underlying CIBC US Tactical Sector Allocation Index has shown an annualized return of 11.4% with a standard deviation of 10.4%, compared to the S&P 500 Index, which has returned 7.6% per annum with a standard deviation of 14.3%. This has resulted in a significantly superior Sharpe ratio of 0.95 compared to 0.59 for the benchmark.

Source: First Asset.

Source: First Asset.

The ETF has a TER of 0.60%.

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