Introducing Smart Beta Rankings – A Better Roadmap For Value Investing
It’s never been easier to rank ETFs, thanks to Q.ai’s inaugural Smart Beta Scores. Currently, there’s no legitimate way for industry experts to truly judge ETFs against one another. Instead, they’re forced to merely assess assets under management (AUM$), expense ratios and fund flows. But does this analysis really offer insights into which ETFs will outperform? It neither allows analysts to compare ETFs nor shows them how ETFs are constructed from a portfolio perspective. And that’s precisely why we introduced Q.ai Smart Beta Scores.
Smart Beta Scores are a novel way to measure ETFs using the same methods we already use to measure traditional investment funds, like mutual funds. In short: Based on our AI factor models, we’ve created a unique portfolio attribution system to understand the risk measures that drive the ETFs’ performances. (Think: Small-cap stocks exposure, interest rate exposure, exposure to oil, etc.) We determine whether an ETF is overweight, neutral, or underweight in our factor groups. Then, based on exposures to particular factor groups, we rank them in categories to determine the best in each category. That is the way wealth managers rank money managers. Why shouldn’t we apply the same heuristic to ETFs?
With Smart Beta Scores, we’re offering a smarter, more transparent way to invest in ETFs.
For our first article, we have chosen to focus on US Value ETFs. As market commentary focuses on whether value investing is back in vogue, we focus on which value ETF you should own.
Our top-rank US Value ETFs is Invesco S&P 600 Pure Value (RZV) RZV , which is overweight in growth, quality value and technical factors, neutral in low volatility and momentum and size factors. It’s one of the top-performing ETFs in sector +9.72 percent YTD. RZV has $3.2b in ASUM$ with an expense ratio of only .15 percent.
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SPDR S&P 600 Value (SLYZ) is our other top-ranking ETF. It’s overweight in growth, quality value, and technical factors, neutral in low volatility and momentum factors, and underweight in the size factor. It’s a top-performing ETF in sector with +11.59 percent YTD. Its expense ratio is one of the most expensive at .35 percent, and it’s a small ETF in terms of AUM$ at $182.06 mm.
The worst-ranked US Value ETF is Vanguard MegaCap 300 Value (MGV) MGV . It’s neutral i n growth, technical, and size factors, and it’s underweight in low volatility and momentum and quality value factors. It’s one of the worst performers at +2.49 percent YTD, one of the largest ETFs with AUM$ of $3.5b, and one of the lowest expense ratios at .07 percent.
Our Smart Beta ETF Rankings are updated every two weeks on Forbes AI Investor.