Industry Updates

USAA adds value and momentum factor ETFs to its arsenal

David Tuckwell

Today's listings


United Services Automobile Association to list five ETFs

USAA, the group that provides financial services to members and veterans of the US military, is listing six ETFs in New York. They are:

  • USAA Core Short-Term Bond ETF (USTB)

  • USAA Core Intermediate-Term Bond ETF (UITB)

  • USAA MSCI USA Value Momentum Blend Index ETF (ULVM)

  • USAA MSCI USA Small Cap Value Momentum Blend Index ETF (USVM)

  • USAA MSCI International Value Momentum Blend Index ETF (UIVM)

  • USAA MSCI Emerging Markets Value Momentum Blend Index ETF (UEVM)

The two bond ETFs (USTB, UITB) are both actively managed and part of a growing trend among money managers to list actively managed fixed income funds in the lower cost structure of an active ETFs.

USTB will invest at least 80% of its assets in investment grade US dollar-denominated debts, derivatives and other stocks with similar characteristics, the prospectus says. USTB will leave 20% of its assets available to invest in junk debts including sub-prime mortgages. USTB only invests in debts with maturities of three years or less.

UITB is structured the same as USTB, investing in investment-grade and junk grade debts in a 4:1 ratio. USTB, however, will invest in bonds that have three to ten-year maturities.

The four equity ETFs are passive and use factors to track MSCI indexes.

ULVM starts with the MSCI USA Index and selects companies based on value and momentum. Value is judged in standard industry style, using book value, price-to-earnings and cash flow.Momentum is calculated using stocks' "price trends over the last six months and twelve months, adjusted for volatility," the prospectus says.

ULVM then gives all the companies in the parent index an overall score relative to their sector and takes the top 25%, weighted by volatility.

USVM does much the same as ULVM but for small-cap US companies and with an added liquidity filter to rule out untradable smaller companies.

USVM starts with the MSCI USA Small Cap Index and applies a liquidity filter, ruling out the least traded 10% of stocks. It then chooses the top 25% of small caps based on value and momentum.

UIVM applies a similar investment strategy, but for companies outside the US. It takes large companies from rich countries via the MSCI World ex USA Index and screens them for value and momentum. The top 25% taken

UEVM works the same as UIVM, but for emerging markets via the MSCI Emerging Markets Index.


Cathay cross-lists funds into USD

Cathay Securities is cross-listing three plain vanilla ETFs into US dollars. They are:

  • Cathay FTSE China A50 ETF (00636K)

  • Cathay Nikkei 225 Currency-hedged ETF (00657K)

  • Cathay Dow Jones Industrial Average ETF (00668K)

Each of these is currently only available in Taiwanese dollars.

Today's best ETF articles from around the web

ETFs rose from the ashes of the 1987 crash

Mutual funds meeting redemption orders was a major cause of the Black Monday stock market crash in 1987. But it was from the ashes of mutual funds scattered on that day that ETFs arose. Having witnessed mutual funds' failure, Nathan Most began researching others ways baskets of securities could be traded. The result was the SPDR S&P 500 Trust ETF (The Spiders), launched in January 1993, almost six years later.

Small players come to ETFs for fixed income exposure

Asian small investors are locked out of the institutional bond market because their orders aren't big enough for investment banks to bother with. But this is changing thanks to ETFs. BlackRock has said that it has seen a surge of interest from Asian investors who want to buy blue-chip debts, as it's only through ETFs that they can really get them. Asian investment banks are starting to take notice.

ETFs are great… if you can afford them

The stock market has boomed 25% since Trump's election. That's great if you own equities or ETFs that contain equities, but many people don't have the money to buy in. "Dow records don't mean much to about half of Americans who weren't invited to the party on Wall Street."

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