Russell Investments launched its first international equity factor exchange-traded funds (ETFs) today, designed to provide investors with focused exposure to fundamental risk factors within their portfolio's international equity allocation. The three new factor ETFs, which listed today on NYSE Arca, focus on some of the same factors as the existing set of 10 domestic factor ETFs: low beta, low volatility and high momentum.
"Russell now offers a comprehensive global family of factor-based ETFs, providing investors with a readily accessible way to gain exposure to low volatility, low beta and high momentum factors within a portfolio that covers U.S. large cap, U.S. small cap and ex-U.S. large cap markets," said James Polisson, managing director of Russell's global ETF business. "The addition of these international equity factor ETFs is particularly timely as investors may be starting to look toward year-end portfolio rebalancing."
The following chart describes the three new Russell Developed ex-U.S. factor ETFs, which offer exposure to low beta, low volatility and high momentum stocks in 24 developed countries including Canada. Based on Russell research, these three risk factors have shown strong influences on portfolio returns:
| Name | Ticker | Focused Exposure |
|---|---|---|
| Russell Developed ex-U.S. Low Beta ETF | XLBT | Large cap stocks in developed markets outside the U.S market with the lowest predicted beta or sensitivity to price changes of the broad market over the next three to six months. |
| Russell Developed ex-U.S. Low Volatility ETF | XLVO | Large cap stocks in developed markets outside the U.S. market that have exhibited the lowest variability in total returns over the previous 60 trading days. |
| Russell Developed ex-U.S. High Momentum ETF | XHMO | Large cap stocks in developed markets outside the U.S. market that have exhibited the highest cumulative total returns over the previous 250 trading days, excluding the last 20 trading days. |
The global series of low beta, low volatility and high momentum ETFs combine Russell's expertise in investment management, portfolio construction and index methodology with Axioma's expertise in risk analytics and portfolio optimization. Each newly launched Russell factor ETF is constructed with an underlying Russell-Axioma Developed ex-U.S. Large Cap Factor Index, each of which draws from the comprehensive Russell Developed ex-U.S. Large Cap Index. The new international Russell-Axioma Factor Indexes, launched last week, are reconstituted monthly to help maintain their focus on each specific factor.
"The Russell-Axioma approach when developing these products was to seek true factor purity in the returns, not just factor exposure," said Greg Friedman, managing director of Russell's global ETF product group. "Investors may benefit from understanding their vulnerability to certain risk factors, and targeting these factors can provide them with a more focused portfolio and help manage unintended risks."
The three newly launched Russell Developed ex-U.S factor ETFs have a net expense ratio of 0.25%, while the five U.S. large cap Russell 1000® factor ETFs have a net expense ratio of 0.20% and the five U.S. small cap Russell 2000® factor ETFs have a net expense ratio of 0.30%.
| Russell Factor ETFs | Ticker | Expense Ratio (%) ¹ | |
|---|---|---|---|
| Gross | Net | ||
| U.S. Large Cap | |||
| Russell 1000 High Beta ETF | HBTA | 0.49 | 0.20 |
| Russell 1000 Low Beta ETF | LBTA | 0.49 | 0.20 |
| Russell 1000 High Volatility ETF | HVOL | 0.49 | 0.20 |
| Russell 1000 Low Volatility ETF | LVOL | 0.49 | 0.20 |
| Russell 1000 High Momentum ETF | HMTM | 0.49 | 0.20 |
| U.S. Small Cap | |||
| Russell 2000 High Beta ETF | SHBT | 0.69 | 0.30 |
| Russell 2000 Low Beta ETF | SLBT | 0.69 | 0.30 |
| Russell 2000 High Volatility ETF | SHVY | 0.69 | 0.30 |
| Russell 2000 Low Volatility ETF | SLVY | 0.69 | 0.30 |
| Russell 2000 High Momentum ETF | SHMO | 0.69 | 0.30 |
| International Large Cap | |||
| Russell Developed ex-U.S. Low Beta ETF | XLBT | 0.59 | 0.25 |
| Russell Developed ex-U.S. Low Volatility ETF | XLVO | 0.59 | 0.25 |
| Russell Developed ex-U.S. High Momentum ETF | XHMO | 0.59 | 0.25 |
¹ The Net Annual Operating Expense Ratio may be less than the Total Annual Operating Expense Ratio and represents the actual expense expected to be borne by shareholders after application of a contractual expense waiver through July 29, 2014, excluding extraordinary expenses. This contractual agreement may not be terminated during the relevant period except at the Board of Trustee's discretion. Details of this agreement are in the current prospectus. The fee waiver for these U.S. Large Cap ETFs, U.S. Small Cap ETFs and newly launched International Large Cap ETFs is effective as of November 3, 2011.
