BlackRock Adds to Smart Beta Lineup With Nine Sector ETFs

In another sign of the rapid growth of smart or strategic beta exchange traded funds BlackRock Inc.'s BLK iShares unit, the world's largest ETF issuer, is expanding its already substantial lineup of smart beta ETFs with nine factor-based sector funds.

iShares introduced the new iShares Edge MSCI Multifactor Sector ETFs on Thursday. The new ETFs target select companies within each U.S. stock sector and focus on financially healthy firms (quality), inexpensive stocks (value), smaller companies (size), and trending stocks (momentum),” according to a statement from New York-based BlackRock. 

The iShares Edge MSCI Multifactor Energy ETF ERGF follows the MSCI USA Energy Diversified Multiple-Factor Capped Index and holds 22 stocks. The iShares Edge MSCI Multifactor Materials ETF MATF holds 26 stocks and tracks the MSCI USA Materials Diversified Multiple-Factor Capped Index.

The iShares Edge MSCI Multifactor Industrials ETF INDF holds 34 stocks and follows the MSCI USA Industrials Diversified Multiple-Factor Capped Index. A multiple-factor approach to consumer discretionary names, the iShares Edge MSCI Multifactor Consumer Discretionary ETF CNDF is home to 43 stocks.

CNDF's staples counterpart, the iShares Edge MSCI Multifactor Consumer Staples ETF CNSF has 29 constituents. iShares' multi-factor healthcare play, the iShares Edge MSCI Multifactor Healthcare ETF HCRF, follows the MSCI USA Health Care Diversified Multiple-Factor Capped Index and holds 37 stocks.

The iShares Edge MSCI Multifactor Financials ETF FNCF houses 41 stocks while following the MSCI USA Financials Diversified Multiple-Factor Capped Index. A multi-factor idea for the technology sector is the iShares Edge MSCI Multifactor Technology ETF TCHF.

Investors can spice up conventional approaches to the utilities sector with the 23-stock iShares Edge MSCI Multifactor Utilities ETF UTLF. All of the new iShares multi-factor sector ETFs charge 0.35 percent per year, or $35 for every $10,000 invested.

“Smart beta ETFs have become increasingly popular strategies for investors seeking to manage risk and obtain precise exposure to historically return driving factors, and saw $31bn in new flows globally in 2015. Minimum volatility ETFs were a major contributor in 2015 with over $11bn of inflows, and have led the way in 2016 with a record-breaking $12.6bn of inflows year-to-date,” according to BlackRock.

Despite the rapid growth of multi-factor ETFs, the approach is not often applied at the sector level. However, John Hancock introduced several multi-factor sector ETFs last year before launching another five in March.