Deutsche Asset Management (Deutsche AM), begun trading a new Multifactor Russell 2000 ETF, the Deutsche X-trackers Russell 2000 Comprehensive Factor ETF (Nyse Arca: DESC) on Tuesday, June 28, 2016. Here is a synopsis of the new ETF:
|Symbol: DESC||Exchange: NYSE ARCA|
|Name: Deutsche X-trackers Russell 2000 Comprehensive Factor ETF||Net Expense Ratio: 0.30%|
The Deutsche X-trackers Russell 2000 Comprehensive Factor ETF seeks investment results that correspond generally to the performance, before fees and expenses, of the Russell 2000 Comprehensive Factor Index.
The Russell 2000 Comprehensive Factor Index is designed to track the equity market performance of companies in the United States selected on the investment style criteria (factors) of value, momentum, quality, low volatility and size. The companies eligible for the Underlying Index are derived from its starting universe, the Russell 2000 Index, which is comprised of small-cap equity securities from issuers in the United States.
The index provider, Frank Russell Company (Index Provider), selects companies for the Underlying Index using a proprietary rules-based multifactor selection and weighting process designed to increase the Underlying Index’s exposure relative to the starting universe, to companies demonstrating the following factors:
Value. The value score is calculated based on a company’s valuation ratios (e.g., cash-flow yield, earnings yield and country relative sales to price). The value factor captures excess returns to stocks that have low prices relative to their fundamental value.
Momentum. The momentum score is calculated based on each company’s cumulative 11 month return. The momentum factor reflects excess returns to stocks with stronger past performance. “Momentum” style investing emphasizes investing in securities that have had higher recent price performance compared to other securities.
Quality. The quality score is calculated from a company’s leverage and profitability (e.g., return on assets, asset turnover and accruals). The quality factor captures excess returns to stocks that are characterized by low debt, stable earnings growth, and other “quality” metrics.
Low Volatility. The low volatility score is calculated based on the standard deviation of 5 years of weekly local total returns. The low volatility factor captures excess returns to stocks with lower than average volatility, beta, and/or idiosyncratic risk. Volatility is a statistical measurement of the magnitude of up and down asset price fluctuations (increases or decreases in a stock’s price) over time.
Size. The size score is calculated based on the full market capitalization of a company.
Companies are weighted based on their relative exposure to all 5 factors. Companies that do not display meaningful multi-factor characteristics are not eligible for inclusion in the Underlying Index. The Fund uses a representative sampling indexing strategy in seeking to track the Underlying Index, meaning it generally will invest in a sample of securities in the index whose risk, return and other characteristics resemble the risk, return and other characteristics of the Underlying Index as a whole.
As of June 7, 2016, the Underlying Index consisted of 1,431 securities with an average market capitalization of approximately $1.19 billion and a minimum market capitalization of approximately $28.1 million.
As of June 7, 2016, the Underlying Index was substantially comprised of issuers in the financial services sector (35.4%) and the industrial sector (20.9%).
Fund Top Holdings (06/27/16):
|CORE||Core-Mark Holding Co||0.40 %|
|PLCE||CHILDREN’S PLACE||0.31 %|
|UTL||Unitil Corp||0.29 %|
|SUP||SUPERIOR INDUSTRIES INTL||0.29 %|
|EBF||ENNIS INC||0.28 %|
|CSH||CASH AMERICA INTL INC||0.27 %|
|BRSS||Global Brass and Copper Holdings||0.26 %|
|FNFV||FNFV Group||0.26 %|
|ACRE||Ares Commercial Real Estate||0.26 %|
|VVI||Viad Corp||0.25 %|
DESC Home Page
Category: Equities> Regions> USA> US Small Cap
Here is a comment from Fiona Bassett, Head of Passive Strategy in the Americas:
“DESC, focusing on small cap US stocks, is a logical addition to our Deutsche X-trackers Comprehensive Factor ETFs suite, which is based on an intelligently designed index construction mechanism that takes into account five investment factors. Academic research has identified certain stocks’ characteristics that are important in explaining a stock’s risk and performance. Emphasizing these factors can potentially make a significant contribution to outperforming traditional market-capitalization weighted benchmark indices.”