Nationwide, begun trading its first three ETFs, the Nationwide Risk-Based U.S. Equity ETF (NyseArca: RBUS), the Nationwide Risk-Based International Equity ETF (NyseArca: RBIN) and the Nationwide Maximum Diversification U.S. Core Equity ETF (NyseArca: MXDU), on Monday, September 18, 2017. Here is a synopsis of the new ETFs:
1.
FUND INFORMATION:
| Symbol: RBUS | Exchange: NYSE ARCA |
| Name: Nationwide Risk-Based U.S. Equity ETF | Net Expense Ratio: 0.30% |
FUND OBJECTIVE:
The Nationwide Risk-Based U.S. Equity ETF seeks to track the total return performance, before fees and expenses, of the R Risk-Based US Index.
REFERENCE INDEX:
The R Risk-Based US Index is a rules-based, equal risk-weighted index that is designed to provide exposure to U.S.-listed large capitalization companies with lower volatility, reduced maximum drawdown (the loss from the highest Index value to its lowest value before achieving a new highest value), and an improved Sharpe ratio (a risk-adjusted measure of return) as compared to traditional, market capitalization weighted approaches.
The Index was developed in 2014 and is owned by Rothschild Risk Based Investments LLC, the Fund’s index provider. Construction of the Index begins with the universe of equity securities that have their primary listing in the United States. The universe is then screened to keep only the top 500 equity securities by market capitalization and to eliminate securities with insufficient liquidity (average daily traded value of less than $1 million over the most recent 3-month period) and equity securities that have been listed for less than 1 year (the remaining securities are referred to as the “Eligible Universe”).
The securities in the Eligible Universe are then subjected to a marginal risk contribution calculation based on each security’s volatility and correlation to the other Eligible Universe securities for the most recent one-year calculation period. The securities in the Eligible Universe are then ranked based on their marginal risk contribution, and the 50% of securities with the lowest marginal risk contribution are selected to be included in the Index (the “Index Constituents”). The Index Constituents are then weighted by a systematic equally-weighted risk contribution model (the “Risk-Weighting Model”). The Risk-Weighting Model incorporates each Index Constituent’s volatility and correlation to the other Index Constituents for the most recent one-year calculation period to produce a portfolio where each Index Constituent contributes the same level of risk, subject to the constraint that no individual Index Constituent will have a weight that exceeds 5% of the Index. The intent of security selection by marginal risk contribution ranking and the Risk-Weighting Model is to:
(i) lower the overall volatility of the Index, (ii) increase its Sharpe ratio, and (iii) reduce the maximum drawdown without negatively impacting the diversification and expected return of the Index.
The list of securities in the Eligible Universe is updated quarterly on the first Friday of each January, April, July, and October (or the previous business day if such Friday is not a business day). The Index is reconstituted (i.e., Index Constituents are added or deleted and weights are reset based on the Risk-Weighting Model) monthly at the close of business on the second Friday of each month (or the next business day if such Friday is not a business day).
Fund Top 10 Holdings (09/22/2017):
| MONSANTO CO NEW | MON | 0.93% |
| NXP SEMICONDUCTORS N V | NXPI | 0.86% |
| HUMANA INC | HUM | 0.79% |
| TIME WARNER INC | TWX | 0.69% |
| LOCKHEED MARTIN CORP | LMT | 0.64% |
| CHIPOTLE MEXICAN GRILL INC | CMG | 0.61% |
| JOHNSON & JOHNSON | JNJ | 0.60% |
| DISNEY WALT CO | DIS | 0.59% |
| NORTHROP GRUMMAN CORP | NOC | 0.59% |
| ALLSTATE CORP | ALL | 0.58% |
Useful Links:
RBUS Home Page
2.
FUND INFORMATION:
| Symbol: RBIN | Exchange: NYSE ARCA |
| Name: Nationwide Risk-Based International Equity ETF | Net Expense Ratio: 0.42% |
FUND OBJECTIVE:
The Nationwide Risk-Based International Equity ETF seeks to track the total return performance, before fees and expenses, of the R Risk-Based International Index.
REFERENCE INDEX:
The R Risk-Based International Index is a rules-based, equal risk-weighted index that is designed to provide exposure to large capitalization companies in developed markets outside the United States and Canada with lower volatility, reduced maximum drawdown (the loss from the highest Index value to its lowest value before achieving a new highest value), and an improved Sharpe ratio (a risk-adjusted measure of return) as compared to traditional, market capitalization weighted approaches.
The Index was developed in 2017 and is owned by Rothschild Risk Based Investments LLC, the Fund’s index provider. Construction of the Index begins with the universe of equity securities that have their primary listing in the following countries: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Netherlands, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom. The universe is then screened to keep only the largest equity securities by market capitalization listed in each country and to eliminate securities with insufficient liquidity (average daily traded value of less than USD$1 million over the most recent 3-month period) and equity securities that have been listed for less than 1 year (the remaining securities are referred to as the “Eligible Universe”).
The securities in the Eligible Universe are then subjected to a marginal risk contribution calculation based on each security’s volatility and correlation to the other Eligible Universe securities for the most recent 1-year calculation period. The securities in the Eligible Universe are then ranked based on their marginal risk contribution, and the 50% of securities with the lowest marginal risk contribution are selected to be included in the Index (the “Index Constituents”). The Index Constituents are then weighted by a systematic equally-weighted risk contribution model (the “Risk-Weighting Model”). The Risk Weighting Model incorporates each Index Constituent’s volatility and correlation to the other Index Constituents for the most recent 1-year calculation period to produce a portfolio where each Index Constituent contributes the same level of risk, subject to the constraint that no individual Index Constituent will have a weight that exceeds 5% of the Index. The intent of the security selection by marginal risk contribution ranking and Risk Weighting Model is to (i) lower the overall volatility of the Index, (ii) increase its Sharpe ratio, and (iii) reduce the maximum drawdown without negatively impacting the diversification and expected return of the Index.
The list of securities in the Eligible Universe is updated quarterly on the first Friday of each January, April, July, and October (or the previous business day if such Friday is not a business day). The Index is reconstituted (i.e., Index Constituents are added or deleted and weights are reset based on the Risk-Weighting Model) monthly at the close of business on the second Friday of each month (or the next business day if such Friday is not a business day). The Index is expected to have significant exposure to companies in Europe and Japan.
Fund Top 10 Holdings (09/22/2017):
| JARDINE MATHESON | JM SP | 1.45% |
| NITORI HOLDINGS | 9843 JP | 1.24% |
| TOKYO ELECTRON | 8035 JP | 1.22% |
| CHINA MOBILE LTD | 941 HK | 1.22% |
| JARDINE STRATEGIC | JS SP | 1.08% |
| ASAHI KASEI CORP | 3407 JP | 0.98% |
| NIDEC CORPORATION | 6594 JP | 0.98% |
| HSBC HOLDINGS PLC | HSBA LN | 0.93% |
| TENARIS S.A. | TEN IM | 0.87% |
| TAISEI CORP | 1801 JP | 0.84% |
Useful Links:
RBIN Home Page
3.
FUND INFORMATION:
| Symbol: MXDU | Exchange: NYSE ARCA |
| Name: Nationwide Maximum Diversification U.S. Core Equity ETF | Net Expense Ratio: 0.34% |
FUND OBJECTIVE:
The Nationwide Maximum Diversification U.S. Core Equity ETF seeks to track the total return performance, before fees and expenses, of the TOBAM Maximum Diversification USA Index.
REFERENCE INDEX:
The TOBAM Maximum Diversification USA Index is a rules-based index that is designed to create a more diversified equity portfolio of the common and preferred stock of large and mid-capitalization U.S. companies relative to traditional market capitalization weighted benchmarks. The Index uses a quantitative model to weight companies in the Index universe to maximize the Diversification Ratio of the Index, a proprietary metric based on the volatility of each Index constituent and its correlation to the other Index constituents.
The Index was developed in 2011 by TOBAM S.A.S., the Fund’s index provider. Construction of the Index begins with the universe of large and mid-capitalization common and preferred stocks of U.S. companies with a minimum market capitalization set by the Index rules and adjusted quarterly based on changes to the overall U.S. equity market capitalization. As of August 31, 2017, the minimum market capitalization was $5 billion. Companies in the Index universe are then screened to eliminate securities with insufficient liquidity and relatively new issues (the remaining securities are referred to as the “Eligible Universe”).
Companies in the Eligible Universe are then screened against a socially responsible investment (SRI) exclusion blacklist. The SRI exclusion blacklist contains those companies whose activities do not meet the criteria for socially responsible investing, such as the production or sale of unconventional weapons, production of tobacco, production of coal or coal-based energy, serious or systematic human rights violations, severe environmental damage, gross corruption, or other particularly serious violation of ethical norms. Companies included on the SRI exclusion blacklist are eliminated from the Eligible Universe, and the remaining companies are included in the Index (the “Index Constituents”). The Index Constituents are then analyzed for their volatility and correlation to each other and weighted to maximize the Diversification Ratio, a mathematical definition of diversification developed by TOBAM. The model used to maximize the Diversification Ratio (the “MaxDiv® Model”) seeks to lower the overall volatility of the Index while maintaining its diversification. The maximum weight for each stock is the lower of (i) 1.5% or (ii) 20 times the security’s weight had the Eligible Universe been market capitalization weighted (the “Cap-Weighted Benchmark”). Additionally, the MaxDiv Model is constrained to ensure that the “active share” of the Index, which measures how much the holdings of the Index differ from those of the securities in the Cap-Weighted Benchmark, cannot exceed 50% (e.g., if an Index Constituent’s weight is 1% in the Index and 5% in the Cap-Weighted Benchmark, then the Index Constituent’s contribution to the active share of the Index would be 4%). The MaxDiv Model is also optimized to reduce turnover (e.g., minimum market capitalizations and median value traded are reduced for companies already included in the Index).
The Index is reconstituted (i.e., Index Constituents are added or deleted and weights are reset based on the MaxDiv Model) quarterly after the close of business on the third Friday of each March, June, September and December using data as of the close of business on the first Friday of the relevant month.
Fund Top 10 Holdings (09/22/2017):
| NETFLIX INC | NFLX | 1.59% |
| TYSON FOODS INC | TSN | 1.52% |
| INTUITIVE SURGICAL INC | ISRG | 1.50% |
| FACEBOOK INC | FB | 1.47% |
| NEWMONT MINING CORP | NEM | 1.47% |
| ELECTRONIC ARTS INC | EA | 1.42% |
| APPLE INC | AAPL | 1.37% |
| HUMANA INC | HUM | 1.37% |
| DOLLAR GEN CORP NEW | DG | 1.36% |
| BEST BUY INC | BBY | 1.35% |
Useful Links:
MXDU Home Page