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Diamond Hill launches Valuation-Weighted 500 ETF


Diamond Hill Capital Management has launched the Diamond Hill Valuation-Weighted 500 ETF (DHVW), which uses an intrinsic value capitalisation approach to track an index seeking to outperform traditional broad-based market capitalisation-weighted index funds.

"We strongly believe that a company's intrinsic value is independent of its current price, which can be affected over the short term by a number of factors including the impact of capital structure on reported earnings and the emotional reaction of investors to market conditions," says Ric Dillon, chief executive officer and portfolio manager at Diamond Hill.  "Our methodology seeks to address these shortcomings and provides a forward-looking framework for assessing a company's future value.  As a result, we believe our ETF gives advisors and investors a better way to establish broad exposure to the US large cap equity markets."

DHVW seeks to track the total return performance, before fees and expenses, of the Diamond Hill Valuation-Weighted 500 index. The index uses a patent-pending, rules-based methodology to calculate the intrinsic value of the 700 largest US-listed companies by market capitalisation. The calculation of intrinsic value is based on normalised earnings and earnings growth, dividends expected to be paid to shareholders over the next five years, and projected tangible book value. The intrinsic value capitalisation of the 700 companies in the initial universe is then estimated, and the 500 largest companies by intrinsic value capitalisation are included in the index, eliminating the bottom 200 companies. The remaining 500 holdings are weighted according to their intrinsic value capitalisation. The intrinsic value methodology is based on a version of the investment model employed by Diamond Hill since its founding in 2000.

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