GEM: new Smart-Beta Emerging Market Equity ETF by Goldman Sachs

Goldman Sachs Asset Management begun trading the Goldman Sachs ActiveBeta Emerging Markets Equity ETF (NYSEArca: GEM) on Tuesday, September 29, 2015.



Symbol: GEM    Exchange: NYSE Arca
Name: Goldman Sachs ActiveBeta Emerging Markets Equity ETF Net Expense Ratio: 0.45%


The Goldman Sachs ActiveBeta Emerging Markets Equity ETF seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the Goldman Sachs ActiveBeta Emerging Markets Equity Index.

The Goldman Sachs ActiveBeta Emerging Markets Equity Index is designed to deliver exposure to equity securities of emerging market issuers. The Index is constructed using the patented ActiveBeta Portfolio Construction Methodology, which was developed to provide exposure to the “factors” (or characteristics) that are commonly tied to a stock’s outperformance relative to market returns. These factors include value (i.e., how attractively a stock is priced relative to its “fundamentals,” such as book value and free cash flow), momentum (i.e., whether a company’s share price is trending up or down), quality (i.e., profitability) and low volatility (i.e., a relatively low degree of fluctuation in a company’s share price over time). Given the Fund’s investment objective of attempting to track its Index, the Fund does not follow traditional methods of active investment management, which may involve buying and selling securities based upon analysis of economic and market factors.

Goldman Sachs Asset Management, L.P. (Index Provider”) constructs the Index in accordance with a rules-based methodology that involves 2 steps.

individual factor subindexes for value, momentum, quality and low volatility (the “ActiveBeta Factor Subindexes”) are created from the constituents of the MSCI Emerging Markets Index (Reference Index), a market capitalization-weighted index. To construct each ActiveBeta Factor Subindex, all constituents in the Reference Index are assigned a “factor score” based on certain specified measurements (for example, in the case of the value factor, the factor score is based on a composite of book value-to-price, sales-to-price and free cash flow-to-price). Securities with a factor score that is above a fixed “Cut-off Score” receive an overweight in the applicable ActiveBeta Factor Subindex relative to the Reference Index and securities with a factor score that is below the Cut-off Score receive an underweight in the ActiveBeta Factor Subindex relative to the Reference Index. Accordingly, the magnitude of overweight or underweight that a security receives in constructing the applicable ActiveBeta Factor Subindex is determined by its attractiveness when evaluated based on the relevant factor. The Index only includes long positions (i.e., short positions are impermissible), so the smallest weight for any given security is zero.

(2) The ActiveBeta Factor Subindexes are combined in equal weights to form the Index.
The Index is rebalanced on a quarterly basis in accordance with the published rebalancing schedule of the Reference Index. The rules-based process used to construct the Index incorporates the ActiveBeta Turnover Minimization Technique, which seeks to reduce turnover within the Index.

As of July 31, 2015, the Index consisted of 677 securities with a market capitalization range of between approximately $580 million and $268.09 billion from issuers in the following emerging market countries: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.


Regional Allocation (09/28/2015):

Asia ex-Japan 69.6%
Europe, M.East, Africa 17.0%
Latin America 13.4%


Top 10 index companies (09/28/2015):

Samsung Electronics Co Ltd 2.8%
Taiwan Semiconductor Manufacturing Co Ltd 2.7%
Tencent Holdings Ltd 2.4%
China Mobile Ltd 2.2%
China Construction Bank Corp 1.8%
Industrial & Commercial Bank of China Ltd 1.4%
Bank of China Ltd 1.1%
America Movil SAB de CV 1.0%
Ping An Insurance Group Co of China Ltd 0.9%
Naspers Ltd 0.9%

Sector Breakdown (09/28/2015):

Financials 24.6%
Consumer Staples  13.0%
Information Technology  12.7%
ETF  9.8%
Telecom Services  9.3%
Consumer Discretionary  9.1%
Industrials  5.8%
Energy  5.6%
Materials  5.2%
Health Care  2.7%
Utilities  2.3%


Useful Links:
GEM Home Page



Category: Equities> Emerging Equity Markets> Emerging Markets Equity Strategy

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