Principal has partnered with Nasdaq Dorsey Wright for the first time to launch the Principal NDW Factor Rotation model portfolio.
The dynamic factor portfolio, which is comprised entirely of Principal’s US Equity factor ETF lineup, aims to identify those factors that will perform well over the coming months. This is the first guided ETF model from NDW that utilises both momentum and mean reversion, in an attempt to capture short-term continuation signals while simultaneously avoiding performance drag due to holding momentum names too long.
A total of six ETFs are considered for selection in the model portfolio, representing a diversified inventory of some of the most powerful style premia available to US investors. This includes Principal’s US Mega Cap Multi-Factor (USMC), Sustainable Momentum (PMOM), Price Setters (PSET), Contrarian Value (PVAL), US Small Cap Multi-Factor (PSC), and Shareholder Yield (PY) ETFs. The model first went live on 8 February.
“Factor investing will continue to grow in importance and adoption,” says Paul Kim, head of ETF strategy at Principal Global Investors. “Our suite of factor ETFs benefits from decades of active and factor investing expertise, the rapidly growing body of academic research, and the many advantages of a rules-based implementation in an ETF. We are delighted that Nasdaq Dorsey Wright has developed a relative strength methodology incorporating our factor ETFs to help investors achieve their unique investment goals.”
“Nasdaq Dorsey Wright’s relative strength methodology gives investors valuable tools to navigate the rapidly evolving world of active and passive management,” says Jay Gragnani, Head of Research and Client Engagement with Nasdaq Dorsey Wright. “Our collaboration with Principal allows us to pair a unique relative strength-based strategy with Principal’s line up to create a guided approach to factor investing.”
There is no overlay model fee in addition to the underlying ETF fees, which range from 12 to 38 basis points. However, financial advisors can only access the model portfolio through subscription to Nasdaq Dorsey Wright’s platform.
As part of the collaboration, Nasdaq Dorsey Wright is responsible for all aspects of portfolio construction and ongoing management, including fund selection and asset allocation decisions. Dorsey Wright selects ETFs for use in the model portfolio based on its proprietary ‘relative strength matrix’ system and a new indicator for measuring momentum sustainability.