Vident Financials broke into the US exchange traded funds market late last year with the launch of the Vident International Equity Fund (VIDI). VIDI turned out to be one of the most successful launches in the history of the industry as the fund recorded more than $100 million in assets within weeks of its unveiling. In less than three months, VIDI’s assets under management have grown to nearly $600 million, showing a CAGR of about 200 percent.
Encouraged by the success of its first product, Vident Financials launched their second fund – the Vident Core US Equity Fund (VUSE). With the launch of VUSE, the Atlanta, GA-based issuer aims to build on the sterling performance of US equities last year that saw the S&P 500 logging its biggest annual gain in 16 years and the Dow Industrials in 18 years.
The new fund qualifies as a smart beta ETF and seeks to mitigate risks typical to US equities. It follows the Vident Core US Equity Index, a strategy that seeks to highlight companies with better corporate governance and higher levels of leadership. Risks associated with market cap weighted funds due to poor financial reporting and low valuations are overcome by applying principles-based investment decisions.
Essentially, VUSE employs four stages of screening. In the first stage, a simple trading volume and market-cap screen is applied. The underlying index is constructed from a universe of 3000 companies with market values not less than $500 million and average daily trading volume of at least $1.5 million.
Next, the top 80 percent firms from the first stage are ranked based on corporate governance, financial reporting and proprietary assessment of expense recognition.
In the third stage, risk premia factors such as earnings quality, positive momentum and favorable valuations are considered.
Finally, more than 500 large-, mid-, and small-cap companies are selected with the highest scores while maintaining industry standards for sector weighting. That means VUSE doesn’t take large sector exposures. The portfolio is reconstituted and rebalanced semi annually to minimize tracking error.
VUSE has an annual expense ratio of 0.55 percent.
Disclosure: No holdings
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