Fundstrat, Reality Shares Partner On New Multi-Factor ETF

November 5, 2018 2:22 pm
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Reality Shares, the exchange traded funds business of fintech firm Blockforce Capital, partnered with boutique research firm Fundstrat Global Advisors to launch the Reality Shares Fundstrat DQM Long ETF (NYSE:DQML).

That new ETF debuted last week and is the seventh ETF in San Diego-based Reality Shares' stable.

What Happened

The new ETF targets the Fundstrat Doctor Quant Model US Large Cap Equal Weighted Long Index (NYSE:DQMUSLCL), which uses domestic large-cap stocks as its starting universe.

DQML's underlying index is built “to seek alpha with the highest precision, DQML invests in the top 100 stocks from the 500 largest companies by market capitalization. The fund is equally weighted and rebalanced on a quarterly basis,” according to a statement.

The index is comprised of the 100 stocks with the highest scores based on DQML's rating system.

“Unlike many fixed weight multi-factor models, the DQM Long Index dynamically optimizes the weights to the realized explanatory power of each group attributing different weights to companies by sector,” according to Reality Shares.

Why It's Important

Traditional multi-factor ETFs, a fast-growing corner of the broader fund universe, focus on several investment factors, such as growth, low volatility, momentum, quality or value. DQML is a significance departure from that strategy as the new ETF “combines over 40 factors, grouped into 8 factor groups spanning fundamental, valuation and sentiment metrics,” according to the issuer.

Technology is the new ETF's largest sector weight at 19.8 percent while the industrial and health care sectors combine for 36.7 percent of the fund's sector exposure. None of DQML's holdings exceed weights of 1.26 percent. DQML's top 10 holdings include Cigna Corp. (NYSE:CI), Boeing Co. (NYSE:BA) and Johnson & Johnson (NYSE:JNJ).

What's Next

DQML charges 0.69 percent per year, or $69 on a $10,000 investment. Other Reality Shares ETFs include the Reality Shares Nasdaq NextGen Economy ETF (NASDAQ:BLCN) and the Reality Shares DIVS ETF (NYSE:DIVY).

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