BetaShares launches Fundamental Index ETF for US equities

BetaShares, a leading provider of Australian exchange traded products, today announced the launch of the first US equities ETF traded on the ASX to use the Fundamental Index® methodology.

The BetaShares FTSE RAFI U.S. 1000 ETF will trade under the ASX code “QUS” and aims to provide an investment return that tracks the performance of the FTSE RAFI US 1000 Index (the “Index”) before fees and expenses. The equities included in the Index are weighted based on measures of the economic size of each company rather than market capitalisation, and include the largest 1000 securities by ‘fundamental value’ amongst US-listed stocks.

The launch of this Fund follows the success of BetaShares’ Australian equities Fundamental Index ETF, the BetaShares FTSE RAFI Australia 200 ETF (ASX: QOZ), launched in mid-2013.

BetaShares Managing Director Alex Vynokur said the launch of QUS provides investors with a simple way to obtain diversified US equities exposure, along with the potential to outperform the market-cap benchmark over the long term in ways more commonly seen in active strategies.

“On average, Australian investors have a heavy bias towards domestic equities” said Mr Vynokur, “Investors looking for simple, transparent access to the US equities market through an ETF will now have the option of selecting a product that provides broad-based exposure at low cost, while additionally using an intelligent methodology that seeks to avoid the potential of market cap indices to overweight stocks that are overvalued, and underweight stocks that are undervalued”

The premise of the fundamental indexation strategy used by QUS is to weight stocks using measures that do not depend on the fluctuations of market prices, as opposed to market capitalisation weighted indices which link the price of a security with its importance to the index.

The methodology used by this index means that, upon a rebalance, the index will:

• Reduce weightings to equities where the market price has increased beyond its economic size

• Increase weightings to equities where the market price has fallen below its economic size

The Index comes with a compelling track record when compared with the traditional cap-weighted benchmark, outperforming the S&P 500 index by an average of over 2% p.a. since 1990. Mr Vynokur said the strong relative performance of the Index makes QUS attractive to investors looking for a core US exposure with the potential to outperform.

“There has been much scrutiny in recent years around the costs and benefits of active managers, with more than 85% of international equities active managers underperforming a passive benchmark over the three-year and five-year periods to June 30 2014[1]”.

“QUS brings the best of both worlds, providing low cost, diversified exposure to US equities with the additional potential for outperformance in ways more commonly seen in active strategies” said Mr Vynokur.