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A Big February For This Multi-Factor ETF

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A Big February For This Multi-Factor ETF

Competition is undoubtedly intensifying in the multi-factor exchange traded funds arena, cementing the notion that luring assets is vital to the long-term viability of many multi-factor ETFs.

Recently, the Oppenheimer Russell 1000 Dynamic Multifactor ETF (CBOE:OMFL) became a standout asset gatherer among multi-factor ETFs.

What Happened

OMFL debuted in November 2017 and came into 2019 with about $227 million in assets under management, a decent though not spectacular sum. Fast-forward to February and OMFL is growing at a rapid pace.

“OMFL has packed in an impressive >$560 million assets just during the month of February, exponentially growing the fund from its previous asset base to its current level of AUM ($832 million),” said Paul Weisbruch, head of ETF sales and trading at Dallas-based Esposito Securities, in a note out Wednesday.

Why It's Important

The Oppenheimer fund employs five investment factors – low volatility, momentum, quality, size and value – in its stock selection process. While the fund's track record is not extensive, it's hard to argue with OMFL's year-to-date returns of 11.28 percent. Those returns could be a contributing factor behind OMFL's rapid growth this year.

OMFL assets under management tally “dwarfs the amount of dollar inflows that the fund saw during the entire year of 2018 ($237 million) and underscores the point that smaller or newer ETFs that may not be visible to all because of limited track records, lower AUM or Average Daily Trading Volume levels or other factors, can grow significantly in short order via investor creation demand,” said Weisbruch.

OMFL follows the Russell 1000 OFI Dynamic Multifactor Index and holds 227 stocks. Its top 10 holdings represent 52 percent of the fund's weight. Seven of those 10 names are members of the Dow Jones Industrial Average, including Apple Inc. (NASDAQ: AAPL) and Boeing Co. (NYSE: BA).

What's Next

“OMFL uses economic and market pricing data to identify whether the economy is in one of four regimes: recovery, expansion, slowdown, or contraction,” said Morningstar in a recent note. “The fund overweights factors that have historically outperformed during the identified economic regime. Using economic regime as a timing signal has more moving parts than a signal that uses return data like mean-reversion or momentum.”

The fund is now the third-largest Oppenheimer ETF.

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