This Vanguard Smart Beta ETF Offers A High Yield And Low Volaltility
Yesterday we spoke about a U.S. Large Cap Value Equity ETF known as VLUE (iShares MSCI USA Value Factor, Expense Ratio 0.15%, $1.9 billion in AUM) which has attracted decent inflows lately.
This fund is one example of a “Smart-Beta” product that the ETF media has been covering since the first of these products debuted several years back, where some “factor” is often incorporated into an indexing strategy to add a level of sophistication to passive beta indexing such as the market capitalization weighting schemes that are the most prevalent in the ETF universe.
Today, we look at another product that is typically considered “Smart-Beta” from PowerShares known as SPHD (PowerShares S&P 500 High Dividend Low Volatility Portfolio, Expense Ratio 0.30%, $2.7 billion in AUM). The fund debuted in October of 2012 and has raised approximately $2.7 billion in assets since then, including about $2 billion in just the trailing one year alone.
Helping SPHD is its 5-star Morningstar ranking, which we note as well as what seems to be an attractive yield for those equity investors whom are looking to build some yield into their portfolios (3.83% presently). As its name suggests, SPHD also has a focus on “Low Volatility” and this is evidenced in its Beta of 0.70 currently.
Like VLUE, SPHD competes in a popular and large segment in terms of assets under management (U.S. Large Cap Value Equity) where the largest fund here as mentioned yesterday is IWD (iShares Russell 1000 Value, Expense Ratio 0.21%, $34.8 billion in AUM) followed by several funds from Vanguard: VTV (Vanguard Value, Expense Ratio 0.09%, $27 billion in AUM), VIG (Vanguard Dividend Appreciation, Expense Ratio 0.10%, $22 billion in AUM), and VYM (Vanguard High Dividend Yield, Expense Ratio 0.10%, $17.6 billion in AUM).
When we explore the sector exposure within SPHD as well as individual equity weightings, we can get a feel for what may be helping the fund outperform while generating its present yield (at a lower than market beta). Fifty individual securities are presently in the portfolio, with top weightings that appear as follows: 1) CME (3.06%), 2) GM (2.96%), 3) PBCT (2.93%), 4) GRMN (2.87%), and PCAR (2.71%). From a sector standpoint we see the highest weighting in Utilities (18%), followed by lesser weightings to Industrials (17%), Technology (13%), and Basic Materials (9%).
The PowerShares S&P 500 High Dividend Low Volatility ETF (NYSE:SPHD) was trading at $39.48 per share on Thursday afternoon, down $0.17 (-0.43%). Year-to-date, SPHD has gained 0.77%, versus a 1.26% rise in the benchmark S&P 500 index during the same period.
SPHD currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #14 of 77 ETFs in the Large Cap Value ETFs category.
Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.
Paul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.
He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.
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