John Hancock unveils multi-factor small cap ETF

Nov 17th, 2017 | By | Category: Equities

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John Hancock Investments has launched the John Hancock Multifactor Small Cap ETF (JHSC US) on NYSE Arca. The underlying index, designed by Dimensional Fund Advisors, provides exposure to US small caps with a value and quality filter.

John Hancock unveils multi-factor small cap ETF

Andrew G. Arnott, president and CEO of John Hancock Investments.

Andrew G. Arnott, president and CEO of John Hancock, commented: “We’re once again pleased to team up with Dimensional to bring their proven multifactor approach to investors seeking exposure to small-cap equity markets. Our firm’s momentum in the ETF space has been strong, and we now have $1 billion in ETF assets under management.”

The ETF tracks the John Hancock Dimensional Small Cap Index. To be eligible for inclusion, securities must have a market cap smaller than the 750th largest US company but larger than the smallest 4% of US companies.

Of this set of small-cap securities, stocks that appear in the bottom quintile when ranked by price-to-book ratio or profitability are excluded from the index. The remaining securities are market cap-weighted to form the index.

The index also employs measures designed to maintain focus on the appropriate factors and reduce turnover at rebalancing, including prohibiting low-momentum securities from increasing their weight in the index, avoiding small weight changes and enhancing redistributions occurring when a sizeable security is removed from the index.

“A focus on small caps is a logical extension of our product line, and complementary to our 12 previously launched multifactor ETFs,” said Steve L. Deroian, head of ETF strategy at John Hancock.

The index currently has 480 constituents. Its sector composition breakdown shows financials is the largest sector representation, making up 17.3% of the weight, followed by information technology and industrials with 16.1% and 14.4% respectively.

The ETF has a gross expense ratio of 0.68% and a net expense ratio of 0.50% due to a waiver in place until 31 August 2019.

JHSC becomes the 13th ETF provided by John Hancock. The full line-up includes nine multi-factor US equity sector funds, three multi-factor funds focused on large-cap, mid-cap and now small-cap US equities, and one multi-factor ETF providing exposure to international equities.

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