State Street Global Advisors has added enhancements to value exchange-traded funds (ETF).
The benchmark changes affected the SPDR MSCI USA value UCITS ETF and the SPDR MSCI Europe value UCITS ETF.
These two ETFs changed their benchmarks to the MSCI USA value exposure select index and the MSCI Europe value exposure select index respectively.
According to State Street, the change will lead to a reduction in the number of securities in each ETF from over a thousand in aggregate to 125 holdings per index.
As a result, there will be a higher conviction value exposure.
Meanwhile, the indices are designed to be sector neutral with an issuer cap of 5 percent, targeting value companies without taking on excessive sector or single security biases.
Mandy Chiu, head of Europe, the Middle East and Africa (EMEA) and Asia-Pacific (APAC) SPDR product for SPDR ETFs, commented: “The performance of the MSCI value exposure select index challenges the perception that value investing no longer works.”
“There has been this widely held view in the market that many value strategies have underperformed, but research demonstrates that the very high value exposure offered by the MSCI value exposure select index delivered returns in excess of the MSCI USA index over the past 10 years.”
Chiu continued: “We believe good factor strategies should provide high exposure to the targeted factors while keeping untargeted exposures in check.”
“The value funds now reflect the latest thinking in value investing, integrating strong value exposure with a quality filter, which looks to avoid the value trap.”
Concluding, Chiu said: “Altering the benchmark for these funds responds to client demand for greater intensity in their value orientation.”
