Three ETFs have been added to the portfolio allocation.
1. iShares MSCI China ETF (MCHI) and KraneShares CSI China Internet ETF (KWEB)
- These ETFs have been included to provide an enhanced exposure to China and Chinese tech stocks. We selected these sector and geographical factors using econometric and graphical screens, then validated their selection by back-testing these factors using our point-in-time algorithms.
- With the Chinese market outperforming since last year, we believe the China and Chinese tech factors will not only provide additional diversification benefits but will continue to outperform going forward
2. Invesco S&P 500 Equal Weight ETF (RSP)
- RSP is an equal weighted ETF that tracks the S&P 500 index. This means that every stock held by the ETF has the same weight, regardless of how large or small the company is. Therefore RSP adds a Size factor tilt biased towards small-cap stocks. At the same time, RSP also simultaneously adds a Value (Vs. Growth) factor tilt.
- Our analysis indicates that the large-cap factor, and to a lesser extent the Growth factor, might no longer provide optimal risk-adjusted returns for Equity100 going forward. As such, the addition of RSP moderates our factor tilts towards the large-cap and Growth factors, respectively, albeit to different degrees.
For more information, please refer to our update here.