O’Shares ETF Investments, begun trading a new US Small Cap Quality Dividend ETF, the O’Shares FTSE Russell Small Cap Quality Dividend ETF (Nyse Arca: OUSM), on Friday, December 30, 2016. Here is a synopsis of the new ETF:

FUND INFORMATION:

Symbol: OUSM	Exchange: NYSE ARCA
Name: O’Shares FTSE Russell Small Cap Quality Dividend ETF	Net Expense Ratio: 0.48%

 

FUND OBJECTIVE:
The O’Shares FTSE Russell Small Cap Quality Dividend ETF seeks to track the performance (before fees and expenses) of the FTSE USA Small Cap Qual/Vol/Yield 3% Capped Factor Index.

REFERENCE INDEX:
The FTSE USA Small Cap Qual/Vol/Yield 3% Capped Factor Index is designed to reflect the performance of publicly-listed small capitalization dividend-paying issuers in the United States exhibiting high quality, low volatility and high dividend yields, as determined by FTSE-Russell (Index Provider). The quality and low volatility factors are designed to reduce exposure to high dividend equities that have experienced large price declines, as may occur with some dividend investing strategies. The constituents of the U.S. Small Cap Target Index are selected from the FTSE USA Small Cap Index. As of November 30, 2016, the Index consisted of 339 securities with a market capitalization range of between $333.6 million and $8.7 billion, with an average market capitalization of $3.9 billion.

The Index is constructed using a proprietary, rules-based methodology designed to select equity securities from the FTSE USA Small Cap Index that have exposure to the following 3 factors:
1) quality,
2) low volatility and
3) yield.

The ‘‘quality’’ factor combines measures of profitability (return on assets, asset turnover ratio and accruals) and leverage. The ‘‘low volatility’’ factor is calculated using the standard deviation of 5 years of weekly local total returns. The ‘‘yield’’ factor is calculated using the company’s twelve month trailing dividend yield. Consecutive ‘‘factor tilts’’ are applied to the equity securities in the FTSE USA Small Cap Index, resulting in the re-weighting of the equity securities according to the scores assigned to these factors. Equity securities with the smallest product of factor scores are removed while ensuring that certain constraints (e.g., diversification, capacity and industry) are satisfied, thereby adjusting the final weights in the U.S. Small Cap Target Index. Individual index constituent weights are capped at 3% at each quarterly rebalance to avoid overexposure to any single security. The U.S. Small Cap Target Index’s investable universe includes real estate investment trusts (‘REITs’).

Top 10 Holdings (12/31/16):

LDOS	Leidos Holdings	2.32%
HCSG	Healthcare Services Group	1.80%
SIX	Six Flags Entertainment	1.67%
BRCD	Brocade Communications	1.57%
TECH	Bio-Techne	1.51%
OMI	Owens & Minor	1.39%
OGE	OGE Energy	1.38%
PKG	Packaging Corp of America	1.22%
RPM	RPM International	1.20%
CBRL	Cracker Barrel Old Country	1.12%

 

Sector Allocation (12/31/16):

Real Estate	19.59%
Consumer Discretionary	15.89%
Industrials	15.07%
Financials	12.25%
Information Technology	11.65%
Utilities	10.10%
Materials	7.75%
Health Care	3.54%
Consumer Staples	2.42%
Telecommunication Services	0.89%
Energy	0.78%

 

 

Useful Links:
OUSM Home Page

ETFtrack comment:
Here is a comment from Connor O’Brien, CEO of O’Shares ETF Investments:
“Conservative investors will appreciate this ETF (OUSM) because it solves a problem. Although many investors want the performance benefits of small caps, they find that the generic market-cap weighted index funds are too risky, and take up too much of their equity risk budget; they find stock picking takes too much research time, and they find active funds are typically too expensive, not transparent and not tax effective. In OUSM, investors get a cost-effective and transparent ETF combined with the investment rules that reflect a disciplined active management process. Some people call this “the best of both worlds”, blending the key benefits of “passive”, referring to the ETF structure, with “active” management, referring to a disciplined stock selection process. In our view, OUSM will make long-term investing in the small cap asset class much more interesting for conservative advisors and investors.”