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Source and Rothschild launch US equal risk ETF


Exchange-traded fund provider Source and Risk Based Investment Solutions (RBIS), a wholly owned subsidiary of Rothschild & Co Group, have launched the Source RBIS Equal Risk Equity US UCITS ETF.

This is the second Rothschild RBIS product available as an ETF.
It aims to provide broad US equity exposure with lower volatility than traditional market-capitalisation-weighted investments without compromising on long-term returns.
The first product – the Source R Equal-Risk European Equity UCITS ETF – was launched in January 2015 and, since inception, has garnered EUR137 million in assets and delivered an 11.4 per cent return, almost 5 per cent ahead of the MSCI Europe index.
The ETF tracks the R Risk-Based US Equity Index, providing exposure to US equities. The largest 500 US stocks are eligible for inclusion. From this, the 250 stocks with the lowest risk (on the basis of their volatility and correlation) are selected. Stocks are then weighted such that they each contribute equal risk. The index is rebalanced monthly and reviewed quarterly.
The R-Risk Based US Equity Index has delivered 3 per cent lower volatility than the S&P 500 since January 2015 while outperforming that benchmark, with annualised returns of 7.77 per cent vs 7.02 per cent. It has delivered better risk-adjusted returns than the S&P 500 with a Sharpe ratio of 0.62 vs 0.45.
Catherine Adibi at RBIS says: “This product offers the same innovative and successful strategy as the European equity centred ETF but for US-focused investors. Most traditional constituent selection methods treat risk as an incidental consequence of the process: the Source RBIS Equal Risk Equity US UCITS ETF effectively turns the process around by using risk as an input. It provides a compelling investment strategy with a proven index track record.”
Chris Mellor at Source says: “The launch of this latest product reflects Source’s commitment to providing best-in-class smart beta strategies and the products that investors are increasingly looking for in today’s volatile, risk-conscious markets. We believe that this form of risk control offers a significant step forward beyond volatility targeting and minimum variance strategies. Source is also committed to working with best-in-breed partners and is delighted to be working once again with Rothschild.”
The ETF is available in USD on the London Stock Exchange.

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