Goldman Sachs Asset Management (GSAM) has made their entry into the fast-growing exchange-traded fund space with the launch of the smart beta ActiveBeta US Large Cap Equity ETF (GSLC) on the NYSE Arca.
Goldman Sachs’ “ActiveBeta” range targets long-term outperformance through a smart beta multi-factor approach.
The fund is the first in a series of “ActiveBeta” ETFs that will track GSAM’s smart beta indices offering systematic multi-factor exposure to well-established drivers of long-term outperformance.
With a relatively low net expense ratio of 0.09% and the strength of the Goldman Sachs brand, GSAM has attracted considerable attention to the new fund.
“We are excited to enter the ETF market,” said Tim O’Neill, Global Co-Head of the Investment Management Division, which includes GSAM. “Our approach to ETFs continues our legacy of investment innovation and at a cost that makes them accessible to all investors.”
The ActiveBeta indices are designed to provide exposure to four factors: value, momentum, quality and low volatility. Index methodologies which weight equity holdings based on these characteristics have historically delivered outperformance when compared to market capitalisation weighted indices.
“Our clients asked us to apply our investment expertise to exchange-traded funds,” said Michael Crinieri, GSAM’s Global Head of ETF Strategies. “We believe ActiveBeta ETFs create solutions for them and capitalize on our global reach and deep knowledge of the markets.”
The ActiveBeta index is created from the constituents of its reference index, the Solactive US Large Cap Index. The process first defines four sub-indices, one for each factor, by assigning each constituent a “factor score” based on its characteristics and including only those above a set cut-off score. These factors include value (how attractively a stock is priced relative to its “fundamentals,” such as book value and free cash flow), momentum (whether a company’s share price is trending up or down), quality (profitability) and low volatility (a relatively low degree of fluctuation in a company’s share price over time). Once these sub-indices are formed, the final index is created as an equally weighted allocation to each sub-index.