Sell-side research and brokerage firm Bernstein has waded into the ETF market with the launch of a pair of funds, the Bernstein US Research Fund (Bats: BERN) and the Bernstein Global Research Fund (Bats: BRGL), based on its own proprietary research.
Robert van Brugge, chairman and CEO of Bernstein.
The ETFs, which have been listed on Cboe ETF Marketplace (formerly BATS Exchange), track stocks rated highly by the firm’s quantitative alpha model that are also selected as likely outperformers by Bernstein’s research analysts.
Robert van Brugge, chairman and CEO of Bernstein, commented: “For the past year, we’ve been publishing the results of our research recommendations, including those made back as far as 2004, to hold ourselves accountable and demonstrate to our clients and the market that deep fundamental and quantitative research insights deliver value beyond passive options. Now with these ETFs, investors can assess our insights directly at a competitive price and in a convenient format.”
Laura Morrison, Senior Vice President, Global Head of Exchange-Traded Products at Cboe, said: “Bernstein is widely known as one of this industry’s leading research firms and is a known pioneer in quantitative investment research. We are delighted Bernstein will be making its expertise and insights available to all investors through ETFs listed on our ETF Marketplace and look forward to working with the team closely in the future.”
BERN tracks the Bernstein US Research Index. The index can include any stock covered by Bernstein’s sell-side analysts listed on a US exchange. Based on their review of a variety of factors, analysts typically assign one of three ratings to each stock: ‘Outperform’ (stocks that are expected to outpace the S&P 500 Index by more than 15% in the next 6-12 months), ‘Market-Perform’ (stocks that are expected to perform within +/-15% of the S&P 500 over the next 6-12 months), or ‘Underperform’ (stocks that are expected to trail the performance of the S&P 500 by more than 15% in the next 6-12 months).
The universe of stocks is also analysed using a proprietary quantitative alpha model, which ranks stocks based on their expected return over the next 12 months based on stock-specific fundamentals, industry rotation and market risk appetite. Sources of alpha used in the model vary by industry and include measures of valuation, capital use, earnings quality, profitability and growth dynamics.
Stocks rated ‘Outperform’ and ranked in one of the top three quintiles by the quantitative model are included in the index, subject to minimum liquidity requirements. Index members are equally weighted and the index is reconstituted and rebalanced once a month.
The portfolio currently includes 57 stocks including names such as Boeing, HP, Adobe, Visa, Paypal, Apple, Eli Lilly and Microsoft.
BRGL tracks the Bernstein Global Research Index, which follows a similar approach to index construction, except the selection universe is all stocks covered by Bernstein analysts globally, and the benchmark used by analysts to assign ratings is the MSCI ACWI rather than the S&P 500.
Individual components include many stocks also in BERN, as well as companies such as EasyJet, Nokia, BHP Billiton, BAE Systems, Unilever, Daimler and Roche.
BERN has an annual fee of 0.50% and BRGL has an annual fee of 0.65%.