FlexShares, the exchange-traded funds (ETFs) platform of Northern Trust, has introduced three dividend-focused ETFs designed to help investors achieve their income needs while still participating in capital growth through the equity market.
Shundrawn Thomas, head of Northern Trust’s ETF Group
The three NYSE-listed funds – which listed in December – seek to deliver a portfolio of stocks that emphasise long-term capital growth and income.
The funds invest in “quality” companies that provide dividend income while controlling for market risk.
Northern Trust defines quality as a function of various fundamental attributes that measure a company’s ability to sustain and grow its earnings and cash flow. These include: management, profitability and cash.
As well as focusing on quality dividend-paying stocks, the funds also seek to replicate the Northern Trust 1250 index, but with different target levels of market volatility or beta. The in-house Northern Trust 1250 Index is broadly reflective of the performance of the US equity market.
The funds include the FlexShares Quality Dividend Index ETF (QDF), which seeks to deliver a beta similar to that of the market (a beta of 1.0), the FlexShares Quality Dividend Dynamic Index ETF (QDYN), which seeks to deliver a beta greater than the market (1.0 – 1.5 times), and the FlexShares Quality Dividend Defensive Index ETF (QDEF), which strives to deliver a beta less than the market (0.5 – 1.0 times).
The funds are structured to mitigate sector, industry and security concentration risks, and come with a net expense ratio of 0.37% per annum.
Commenting on the launch, Shundrawn Thomas, head of Northern Trust’s ETF Group, said: “Our research shows that a high-quality, yield-focused equity position can potentially act as a return stabiliser for a broader portfolio, mitigate risk in volatile markets and provide higher dividend growth.”
He added: “The new equity funds are designed to outperform in a variety of market environments, including upward- and downward-trending markets.”
FlexShares, which launched in September 2011, currently offers 10 ETFs and has more than $2 billion in assets.