DWS Quantifies Quality In A New ETF

DWS, the newly renamed exchange traded funds arm of Deutsche Bank AG DB, expanded its ETF roster Thursday with the debut of the Xtrackers Russell 1000 US QARP ETF QARP.

The new ETF tracks the Russell 1000 2Qual/Val 5% Capped Index. That benchmark “aims to identify companies that have strong quality scores relative to their peers, while also looking at the value scores of the securities to avoid those quality companies that are potentially overpriced,” according to DWS.

In other words, QARP looks to hold stocks with favorable quality and value traits while dodging value traps, or those stocks that look like bargains but never recover to fair value.

Inside The New ETF

QARP holds 385 stocks, 25.8 percent of which are technology names. The industrial and health care sectors combine for a third of the new ETF's weight. Consumer discretionary and consumer staples stocks combine for almost a quarter of QARP's roster.

Eight of QARP's top 10 holdings, a group that combines for about 26 percent of the fund's weight, include eight members of the Dow Jones Industrial Average. Apple Inc. AAPL, Boeing Co. BA, Johnson & Johnson JNJ, Intel Corp. INTC and Wal-Mart Stores Inc. WMT are QARP's top five holdings.

“The launch of QARP adds to the existing Xtrackers comprehensive factor indices line-up, which is designed to track the equity market performance of companies that have demonstrated relatively strong exposure to targeted investment style factors: value, momentum, quality, volatility and size,” according to DWS.

A Favorable Fee

QARP charges 0.19 percent per year, or $19 on a $10,000 investment. That compares favorably with the broader universe of domestic large-cap smart beta strategies.

QARP is the third ETF introduced by DWS this year and the first equity-based strategy. The firm introduced two bond ETFs earlier this year.

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