ACSI Funds, begun trading a first ever Customer Satisfaction ETF, the American Customer Satisfaction Core Alpha ETF (Bats: ACSI), on Tuesday, November 01, 2016. Here is a synopsis of the new ETF:
FUND INFORMATION:
| Symbol: ACSI | Exchange: BATS |
| Name: American Customer Satisfaction Core Alpha ETF | Net Expense Ratio: 0.65% |
FUND OBJECTIVE:
The American Customer Satisfaction Core Alpha ETF seeks to track the performance, before fees and expenses, of the American Customer Satisfaction Investable Index.
REFERENCE INDEX:
The American Customer Satisfaction Investable Index is based on a proprietary methodology developed by the Fund’s investment adviser and index provider in partnership with the American Customer Satisfaction Index, LLC, an affiliate of the Adviser and owner/publisher of the leading national cross-industry measure of customer satisfaction (Customer Satisfaction Data). Calculation of the Customer Satisfaction Data incorporates surveys of more than 100,000 household customers each year to identify trends in customer satisfaction and provide benchmarking insights for companies, industry trade associations, and government agencies.
American Customer Satisfaction Investable Index:
The Index uses an objective, rules-based methodology to measure the performance of (i) large capitalization U.S. listed companies whose customers have been surveyed and who have been assigned a customer satisfaction score as part of the Customer Satisfaction Data (ACSI Companies) and (ii) U.S. sector-specific ETFs used by the Index to supplement its exposure to sectors for which there are too few ACSI Companies to achieve the target sector weights at the time of each rebalance. The Index is sector-weighted to reflect the overall U.S. large cap market, and security-weighted based on the Customer Satisfaction Data, subject to the constraints described below.
Construction of the Index begins with over 350 ACSI Companies across 43 industries and 10 economic sectors. The initial universe is then screened to eliminate companies whose stock is not principally listed on a U.S. exchange or does not meet minimum liquidity requirements, or for which the Customer Satisfaction Data is statistically insignificant. The remaining companies are included in the Index (Index Companies).
At the time of each rebalance of the Index, the weight of each Index Company within a sector is based on its ACSI Score (described below) in proportion to the other ACSI Companies, subject to a maximum of 5%. Additionally, any Index Company with an ACSI Score in the 3rd quartile of ACSI Scores for the applicable sector will be subject to a maximum weight of 3%, and any Index Company with an ACSI Score in the 4th (bottom) quartile of ACSI Scores for the applicable sector will be subject to a maximum weight of 1%. Unallocated Index weight resulting from such constraints is re-allocated equally to the remaining companies in the applicable sector, subject to the above constraints.
A company’s ACSI Score is calculated by utilizing a proprietary model to evaluate customers’ Customer Satisfaction Data based on questions that measure the following facets of satisfaction with a product or service:
Customer Expectations Customer expectations is a measure of the customer’s anticipation of the quality of a company’s products or services. Expectations represent both prior consumption experience, which includes some nonexperiential information like advertising and word of-mouth, and a forecast of the company’s ability to deliver quality in the future.
Perceived Quality Perceived quality is a measure of the customer’s evaluation via recent consumption experience of the quality of a company’s products or services. Quality is measured in terms of both customization, which is the degree to which a product or service meets the customer’s individual needs, and reliability, which is the frequency with which things go wrong with the product or service.
Perceived Value Perceived value is a measure of quality relative to price paid. Although price (value for money) is often very important to the customer’s first purchase, it usually has a somewhat smaller impact on satisfaction for repeat purchases.
At the time of each rebalance of the Index, the Index weight is allocated to each economic sector based on the aggregate number of the Index Companies in each sector relative to that of each other sector, provided that such weights will be adjusted upward or downward if necessary to be within 10% of the weight of such sector in the overall U.S. large cap market. For example, if the unadjusted Index weight for a sector is 9%, but the weight of the sector in the overall U.S. large cap market is 25%, the Index sector weight will be increased by 6% to 15% in total. If the unadjusted Index weight for a sector is 39%, but the weight of the sector in the overall U.S. large cap market is 25%, the Index sector weight will be decreased by 4% to 35% in total. Unallocated Index weight resulting from such downward adjustments is re-allocated first equally to sectors requiring an upward weight adjustment and then equally to all sectors to the extent they stay within the above constraints.
If, at the time of a rebalance of the Index, the aggregate weight of the Index Companies in a particular sector is insufficient to achieve the target sector weight due to the individual security constraints described above, the Index will include an allocation to a sector-specific ETF to supplement the sector exposure, as needed. Additionally, at the time of each rebalance, the Index weight for sectors having fewer than five Index Companies will include an allocation to a sector-specific ETF, as follows: sectors with four or five Index Companies will allocate 50% to sector-specific ETFs, sectors with one to three Index Companies will allocate 66.7% to sectors pecific ETFs, and sectors with zero Index Companies will allocate 100% to sector-specific ETFs. The specific ETFs utilized by the Index are determined based on a combination of factors including their liquidity, fees and expenses, and ability to closely track an index representing the applicable sector of the U.S. equity market. The Index is rebalanced and reconstituted on a quarterly basis after market close on the 10th trading day of each January, April, July, and October. The data used to compute each ACSI Company’s score is updated based on the Customer Satisfaction Data on a rolling basis, no less often than quarterly, with new data replacing earlier data collected in the same period of the previous year.
Fund Top Consituents (11/01/16):
| Apple | 2.26% |
| Johnson & Johnson | 2.13% |
| Vonage Holdings | 1.76% |
| Alphabet | 1.76% |
| HP | 1.73% |
| Ebay | 1.38% |
| Microsoft | 1.33% |
| T-Mobile | 1.27% |
| Yahoo! | 1.24% |
| BB&T | 1.21% |
Sector Allocations (11/01/16):
| Consumer Discretionay | 22.36% |
| Financials | 15.42% |
| Consumer Staples | 14.95% |
| Utilities | 13.97% |
| Info Technology | 10.84% |
| Industrials | 8.04% |
| Telecoms | 6.09% |
| Health Care | 5.89% |
| Materials | 1.23% |
| Energy | 1.21% |
Useful Links:
ACSI Home Page
ETFtrack Comment:
ACSI is the first-of-its-kind ETF that sheds light on customer satisfaction for more than 350 well-known, national brands.
Here is a comment from Kevin Quigg, ACSI Funds’ Chief Strategist:
“Customer satisfaction is a predictor of a company’s future revenue growth and earnings performance. The American Customer Satisfaction Core Alpha ETF utilizes the groundbreaking work of Dr. Claes Fornell, the world’s foremost expert on customer satisfaction measurement, to quantify this optimizing factor. Allowing investors to access ACSI and Dr. Fornell’s proprietary, patented process through the ACSI Funds ETF is an important step for the ETF marketplace and gives investors an innovative solution for their core U.S. equity exposure.”
About ACSI Funds
ACSI Funds is a boutique asset manager that creates investment products based upon the nationally recognized American Customer Satisfaction Index, created in 1994 by University of Michigan Professor Claes Fornell. The ACSI is the only national cross-industry measure of customer satisfaction.