DWS has launched a new quality factor exchange-traded fund (ETF) – the Xtrackers Russell 1000 US QARP ETF (QARP).
The fund seeks investment results that generally correspond to the performance of the underlying index that aims to identify companies that have strong quality scores relative to their peers, while also looking at the value scores of the securities to avoid those quality companies that are potentially over-priced. The quality focus also seeks to avoid “value traps” – companies with favourable valuation metrics as they approach bankruptcy, that a pure value exposure would likely fall into.
“Quality investing aims to target companies that demonstrate strong and persistent profitability, stability or growth in earnings, and a strong financial foundation. In times of market volatility spikes, quality factor strategies have historically behaved defensively, which may provide opportunities for strong outperformance,” says Fiona Bassett, Global Co-Head of Passive Asset Management. “Factor strategies have historically allowed investors to generate alpha and diversify their portfolios, while managing for downside risk. QARP is designed to provide investors exposure to quality companies at a reasonable price.”
QARP, which stands for Quality at a Reasonable Price, seeks investment results that correspond generally to the performance, before fees and expenses, of the Russell 1000 2Qual/Val 5 per cent Capped Index. The launch of QARP adds to the existing Xtrackers comprehensive factor indices line-up, which is designed to track the equity market performance of companies that have demonstrated relatively strong exposure to targeted investment style factors: value, momentum, quality, volatility and size.
“We are excited to continue our collaboration with DWS to offer innovative smart beta alternatives to investors,” says Ron Bundy, managing director of global strategic accounts for FTSE Russell. “We seek to stay at the leading edge of smart beta index development, particularly in the emerging multi-factor space and we are pleased to add a multi-factor dimension to the widely followed US large-cap Russell 1000 Index.”