Market Overview

Goldman Tops 2015 Rookie Smart Beta Entrants


Much to the chagrin of the naysayers, smart or strategic beta exchange traded funds continued their ascent up the ranks of the ETF industry last year. Among the catalysts driving strategic beta ETF growth were the entries of new players to the field and expansions of smart beta lineups by issuers already in the game.

Some of the more notable expansions and new smart beta entries came by way of some already well-known asset management firms. For example, JPMorgan Asset Management, the asset management and funds arm of JPMorgan Chase & Co. (NYSE: JPM), as it has done this year, added to its lineup of smart beta ETFs last year.

New arrivals to the smart beta arena included offerings from Goldman Sachs Group Inc. (NYSE: GS), Legg Mason Inc. (NYSE: LM) and John Hancock. Goldman's foray into the ETF business, has been a success, thanks in large part to significant pre-launch commitments from institutional investors.

As S&P Capital IQ points out in a new note, Goldman has been the most prolific asset gatherer among the new entrants to the smart beta field.

"Since its September 2015 launch, Goldman Sachs ActiveBeta US LargeCap Equity (NYSE: GSLC) pulled in $424 million in assets through the end of the first quarter; $464 million as of April 15. Interestingly, inflows into GSLC have been steady in the seven months since its inception even during months when the ETF declined in value. The ETF's 0.09% expense ratio is equal to that of SPY. We think a competitive expense ratio helped GSLC's 1.6% gain in the first quarter exceed the 1.3% for SPY," said S&P Capital IQ.

"SPY" refers to the SPDR S&P 500 ETF (NYSE: SPY). Including GSLC, Goldman's ETF lineup consists of five ETFs with over $1.2 billion in combined assets under management. The giant of the quintet is the Goldman Sachs ActiveBeta Emerging Markets Equity ETF (NYSE: GEM), which has $643 million in assets.

"GSLC and other regional relatively low-cost, passively managed Goldman ETFs screen companies based on four fundamental factors: value, quality, momentum, and low volatility. Criteria include book-value and sales-to-price, gross profit-divided-by-total-assets, price performance, and 12-month standard deviation. These ETFs are rebalanced on a quarterly basis," adds S&P Capital IQ.

Goldman added the Goldman Sachs ActiveBeta Europe Equity ETF (NYSE: GSEU) and the Goldman Sachs ActiveBeta Japan Equity ETF (NYSE: GSJY) last month.


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