Friday, March 15, 2013

Happy Friday!  It being the third Friday of the month today’s Quant output is more important to us than usual because it is selection day for our smart beta indices.  Today’s top 10 ranking funds will comprise the ETFGsm Quant Equity 10 Index for the next month after going into the index next week.  You can follow that under the Dynamic tab on our home page Index screen or on your Bloomberg terminal under the ticker ETFGQE10.  The other index on that screen is the ETFGsm Golden Dozen with the ticker ETFGQE12.  Designed for institutional managers with liquidity mandates, it is similar to the 10 except it selects the highest 12 ranking funds that have an average daily trading value of at least $5 million.  The YTD performance seen on that screen may not look very special compared to the monster run the market has been on this year but since inception last July both have handily outperformed the S&P 500 and the MSCI All Country World Index.

The YTD performance would have been better if not for the gold miners fund which has come out this time, if Murphy is correct it will now regain all its recent losses.  Not to worry though because Quant has kept the wind at our back otherwise.  The broad US market focus of today’s top rankers will drive performance for the next month with SPY and the iShares S&P 500 Growth Index Fund (IVW) in both indices.  The iShares S&P 500 Index Fund (IVV) also makes the Golden Dozen this month.  Barbelling the broad US market, we see some small cap funds in each as well.  However, there are some distinct differences in the two portfolios this month.  ETFGQE10 will contain three smart beta products from Powershares that do not meet the Golden Dozen’s liquidity requirements.  All three have outperformed the market this year and we hope the leprechaun in the model that stuck us with GDX has overlooked these.  If the Golden Dozen gets back to its outperforming ways it will not only be due to those small caps but also some foreign funds that are beginning to score better.  The SPDR DJ EURO STOXX 50 Fund (FEZ) was a solid performer for us last year and has been working its way back up the rankings lately.  Today’s 11th place overall earns its place in the Golden Dozen.  We also see France and Canada represented with EWQ and EWC where the latter also makes the 10.  You can see all the holdings of all our indices by clicking on any one of them but today’s selections won’t show up until next week’s reconstitution.

Caesar was warned about the ides of March but we hope St Patrick is shining his Irish eyes upon us this month.  ETF Global has built a rainbow over the industry and our performance pages attest to the gold our users have found.  The leprechauns will throw an occasional monkey wrench in the model to keep us humble but Quant has proven to be more powerful than superstitious scapegoats.  So follow the ETFGsm road rising up to meet you leading to miles and miles of Irish smiles.  There’s a beautiful sun rising over Wall Street this morning and we wish you all a Happy St Patrick’s Day.

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