First Asset Investment Management has launched four exchange-traded funds built on MSCI risk weighted equity indices.
“The MSCI Risk Weighted Indexes are uniquely designed to provide broad market exposure to the geographical regions they represent, while being weighted on the basis of low volatility. We believe these new ETFs, which aim to replicate the MSCI indexes, provide Canadian investors excellent diversification and attractive risk-adjusted returns,” says Barry Gordon, First Asset chief executive.
First Asset MSCI USA Low Risk Weighted ETF (RWU) and First Asset MSCI Europe Low Risk Weighted ETF (RWE) will commence trading today on the Toronto Stock Exchange (TSX).
First Asset MSCI World Low Risk Weighted ETF (RWW) and First Asset MSCI Canada Low Risk Weighted ETF (RWC) are expected to commence trading on the TSX on 19 February, subject to applicable TSX approvals.
First Asset MSCI Europe Low Risk Weighted ETF is the first and only European low risk weighted ETF in Canada.
“European equities are trading at attractive valuations relative to their historic mean and earnings growth is poised to accelerate along with a broader regional economic recovery,” says Gordon. “Accordingly, European equities stand to benefit both from multiple expansion as well as organic appreciation.”
The fund will provide Canadian advisors and investors exposure to a broad portfolio of European stocks weighted on the basis of lower historical volatility. The result is a bias towards lower risk and lower size stocks that have historically earned a persistent premium over long periods of time relative to cap-weighted indexes.
“MSCI’s Factor Indexes capture the systematic returns of key investment styles. MSCI’s Risk Weighted Indexes, part of this family, provide a tool to help clients aiming to efficiently mitigate risk,” says Diana Tidd, managing director and head of the MSCI index business in the Americas. “We’re pleased to work with First Asset as they continue to expand their factor-based index ETFs in the Canadian market.”
The MSCI risk weighted indices are designed to tilt a traditional market cap-weighted index towards stocks with lower risk. Each index re-weights all the constituents of a cap-weighted MSCI parent index so that stocks with lower historical return variance are given higher index weights. By emphasising low volatility stocks in this way, they have historically exhibited lower realised volatility compared to their respective parent MSCI indices, and a bias away from large cap stocks evidenced in a cap-weighted methodology, while maintaining reasonable liquidity, capacity and representation of the parent index.
