Milestones For A Momentum ETF

In an environment favoring growth and momentum stocks and the corresponding exchange-traded funds, it may not be surprising to a fund such as the iShares Edge MSCI USA Momentum Factor ETF MTUM thriving.

Still, MTUM is racking up some impressive milestones.

What Happened

On the more superficial side of the ledger, MTUM recently surpassed $10 billion in assets under management, according to a Wednesday tweet from Martin Small, head of U.S. iShares. As of Aug. 28, MTUM, which turned five years old in April, had $10.05 billion in assets under management.

The ETF holds 124 stocks and targets the MSCI USA Momentum Index. That benchmark “is designed to reflect the performance of an equity momentum strategy by emphasizing stocks with high price momentum, while maintaining reasonably high trading liquidity, investment capacity and moderate index turnover,” according to MSCI.

Why It's Important

While the $10 billion milestone is impressive, more important is performance. MTUM is up nearly 16 percent year-to-date and was one of 165 ETFs to hit record highs on Wednesday.

Over the past three years, MTUM is up 74.50 percent compared to “just” 55.4 percent for the S&P 500. Importantly, MTUM's annualized volatility of 13.7 percent over that period is just 140 basis points higher than the S&P 500's, indicating the momentum is delivering favorable risk/reward for investors. Over the past decade, the MSCI USA Momentum Index's standard deviation is only slightly higher than the MSCI USA Index.

As is the case with many momentum strategies, MTUM's current composition relies heavily on the technology and consumer discretionary sectors. Those groups combine for over 61 percent of the fund's weight. Financial services and industrial names combine for almost 23 percent.

What's Next

Although MTUM is overly reliant on the FAANG stocks (just two are found among the ETF's top 10 holdings), further upside for Amazon.com, Inc. AMZN will benefit MTUM because that stock is the fund's largest holding.

Of MTUM's just over $10 billion in assets, $3.62 billion has flowed into the fund this year, making it one of 2018's top asset-gathering smart beta ETFs.

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