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:
|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|
|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.
About Russell ETFs
Russell ETFs were created to deliver a wide range of clearly differentiated market exposures. With Russell ETFs, sophisticated investors gain access to unique exposures ranging from investment disciplines to risk factors as well as to broadly targeted exposures using an ETF of ETFs format. As a result, these investors now have a whole new set of exposures for constructing portfolios and managing risk. For more information about Russell’s full series of factor-based ETFs, please go to www.russelletfs.com.
About Russell Investments
Founded in 1936, Russell Investments is a global financial services firm that serves institutional investors, financial advisers and individuals in more than 35 countries. Over the course of its history, Russell’s innovations have come to define many of the practices that are standard in the investment world today, and have earned the company a reputation for excellence and leadership. The firm had over $137 billion in assets under management as of September 30, 2011.
Axioma, Inc. develops and markets innovative risk analysis, portfolio rebalancing and performance attribution products for the financial services industry. Founded in 1998 and headquartered in New York with additional offices in Atlanta, San Francisco, London, Geneva, Hong Kong, Sydney and Singapore, Axioma helps leading financial firms manage risk, increase returns and improve operational efficiency. For more information about Axioma, please contact Topher Wurts at 212.991.4506, or visit the company’s website at www.axioma.com.
Russell Investments is a Washington, USA Corporation, which operates through subsidiaries worldwide and is a subsidiary of The Northwestern Mutual Life Insurance Company.
This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.
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Investors should carefully consider the investment objectives, risks, charges and expenses before investing in Russell ETFs. This and other information can be found in the funds, prospectuses, which may be obtained by calling 888-RSLETFS (888-775-3837) or downloading the file from russelletfs.com. Read the prospectus carefully before investing. Investing involves risk including possible loss of principal.
Past performance is not a guarantee of future results.
Non-US markets entail different risks than those typically associated with US markets, including currency fluctuations, political and economic instability, accounting changes, and foreign taxation. Securities may be less liquid and more volatile.
The Fund provides exposure to “beta” which is a measure of the sensitivity of a stock’s price to a change in the broad market price level. Although beta stocks are subject to the same risks of common stocks, higher beta stocks are seen as having a higher risk profile than the overall market. However, a portfolio comprised of high beta stocks may not produce investment exposure that is more sensitive to a change in the broad market price level and beta may not accurately predict the risk/return relationship of stocks.
ETFs are subject to risks similar to those of stocks, including those related to short-selling and margin account maintenance, if applicable. Funds that emphasize exposure to high beta, high volatility or high momentum stocks are seen as having a higher risk profile than the overall market. However, a portfolio comprised of high beta or high volatility stocks may not produce investment exposure that is more sensitive or has higher variability to changes in such stocks’ price levels. Positive momentum stocks may experience periods of relative underperformance and may not produce investment experience consistent with prior performance. Funds that emphasize exposure to low beta or low volatility stocks are seen as having a lower risk profile than the overall market. However, a portfolio comprised of low beta or low volatility stocks may not produce investment exposure that is less sensitive or has lower variability to a change in price level. The funds are passively managed and may not match or achieve a high degree of correlation with the return of their corresponding Index. As with all investments, there are certain risks of investing in an ETF, and you could lose money on an investment in an ETF.
Not FDIC Insured. May Lose Value. Not Bank Guaranteed.
Russell ETFs and their corresponding Indexes are new and have limited operating history. New indexes are also subject to errors in construction which may result in unintended exposures. There is no assurance the investment process will consistently lead to successful investing. There is no assurance the stated objectives will be met.
Russell ETFs are distributed by ALPS Distributors, Inc. (“ALPS”). Russell Investment Management Company (“RIMCo,” dba Russell Investments) serves as the investment advisor to the ETFs. ALPS and RIMCo as well as Axioma, Inc. are separate and unaffiliated.
ALPS Distributors, Inc. does not distribute products outside the U.S. and is not the distributor for the Russell High Dividend Australia Shares ETF and Russell Australian Value ETF in Australia.