A New ETF To Refresh The Value Factor

Investors willing to bet the much-maligned value factor is poised to rebound can do so with a new, unique exchange traded fund.

The Acquirers Fund ZIG, a long/short domestic equity strategy, debuted Wednesday.

What To Know

Los Angeles-based Acquirers Funds, a deep value manager run by Tobias Carlisle, is the firm behind ZIG. The objective of the new ETF is to hold long positions in companies that are deeply undervalued and could be targets for acquirers or activist investors while shorting richly valued and financially distressed companies.

“ZIG is a 130/30 long/short deep-value strategy that is designed to track, before fees and expenses, the performance of The Acquirer’s Index,” according to Acquirers Funds.

“For both long and short positions, a stock must be listed in the U.S. and have a market cap in the largest 25 percent of all companies by market cap. From that universe of equities, ZIG’s rules-based index will hold the 30 most deeply undervalued, fundamentally strong stocks in the 'long' portion of its portfolio, while its short portfolio will consist of the 30 stocks deemed to be most overvalued, and fundamentally weak.”

Why It's Important

Traditional value metrics have badly lagged growth counterparts and the broader market for years. Over the past three years, the S&P 500 Value Index is up 33.2 percent, trailing the S&P 500 by more than 1,200 basis points and the S&P 500 Growth Index by 2,300 basis points. Many traditional value funds simply look at price-to-earnings ratios and book value in an effort to identify value stocks.

Long/short strategies that have previously emphasized the value universe have their own set of flaws, including high fees, not enough concentration to generate strong performance and diluted portfolios. ZIG aims to bring investors a better deep value approach.

“An important part of this process is a forensic-accounting diligence of the financial statements, particularly the notes and management’s discussion and analysis, to find information that may impact investment decisions,” said Carlisle. “We find most of our short positions revealed here. That type of thinking and research is what we’ve looked to build into ZIG, so investors of all types and sizes can now add the same approach to their portfolios via a liquid, low-cost ETF.”

What's Next

Not all value stocks are alike, which is a theme ZIG seizes upon. Deep value stocks are usually significantly cheaper than traditional value fare and those deep value names are often backed by strong balance sheets.

ZIG charges 0.94 percent per year, or $94 on a $10,000 investment. That's significantly cheaper than the fees on rival funds in the broader Morningstar universe of long/short value strategies.

Related Links:

Uber Lands In This ETF

Value To Be Had With These China ETFs

Posted In: NewsBroad U.S. Equity ETFsSpecialty ETFsNew ETFsETFs

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.