Goldman Sachs Activebeta U.S Large Cap ETFs: Mild Factor exposure provides an edge

The Goldman Sachs ActiveBeta U.S. Large Cap Index underpinning this fund spins a broad portfolio that pursues four factors: value, quality, momentum, and low volatility. This fund’s mixing approach–which combines four equally weighted distinct sleeves, each focused on a different factor–is simple and transparent.

Approach

While this portfolio’s factor exposure is modest, it is well-diversified and boasts low turnover. This index constructs four separate factor sleeves that start with the Solactive U.S. Large Cap Index, a broad, market-cap-weighted portfolio of large-cap stocks. Each factor sleeve adjusts stocks’ weight based on the strength of their exposure to value, quality (gross profits/total assets), momentum (11-month risk-adjusted return), or low volatility (12-month standard deviation of returns). Stocks with pronounced traits may see their weight materially increase within each sleeve, while those with poor exposure may be eliminated. After the index establishes each sleeve, it weights each of them equally at the portfolio level.

Portfolio

This broad portfolio looks very similar to the S&P 500. The market’s largest stocks receive the most investment, but the fund bends toward those that score well in several of its intended factors. Many stocks carry factor traits that offset, which leaves this fund with mild overall factor exposure. Its quality tilt has been the most defined. In profitability measures like return on invested capital, this fund has outshined the S&P 500. Momentum exposure has been quiet but detectable. The fund’s value tilt has been the weakest of the factors, likely because its quality and momentum sleeves pull it toward more richly valued companies.

Top Holdings

People

Goldman Sachs ActiveBeta® ETFs are managed by our Quantitative Investment Strategies team, comprised of over 95 Portfolio Management and Research professionals, with an average of over 15 years of experience. Raj Garigipati and Jamie McGregor are the named managers on this fund. Gagrigipati has managed this fund since its inception in September 2015, while McGregor joined in April 2016, replacing Steve Jeneste. Garigipati is the head of ETF portfolio management at Goldman Sachs. McGregor was a portfolio manager at Guggenheim for a year prior to joining Goldman Sachs as a portfolio manager in July 2015.

Performance

The fund has come alive recently, outpacing its category benchmark by more than 2 percentage points from May 2021 through December 2021. Its value-oriented consumer discretionary stocks picked up steam, and highly profitable firms like Visa V and Mastercard MA helped it outperform in the tech arena. Steady portfolio management has kept this fund in line with its benchmark index. Over the trailing five years through December 2021, it trailed its benchmark by 13 basis points annualized, a margin slightly wider than its 0.09% expense ratio.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.