AUSTRALIA - Russell Investments has launched a new exchange-traded-fund (ETF), which specifically targets Australian institutional investors.
The fund manager said the new fund taps into its research on value premiums which shows that over time, passive value based strategies have typically delivered a premium of 1.5%-3% over the broad market in Australia. Russell said it had identified a growing desire from institutional investors to capture this premium.
"We have spoken extensively to institutions about their needs and potential future use of ETFs and discovered there is a gap in the market for a flexible, value-style tool," said portfolio manager Scott Bennett
"As with our first ETF, we have invested heavily in researching what investors, in particular institutions, want from an ETF and have developed this tailored solution. As Australia's first style-based ETF, we are hoping to provide an easy way to access the value premium in the Australian market."
Portfolio manager Scott Bennett said the fund would aim to complement rather than compete with managed funds and could be used as a plug for an active manager, while a new manager is being found. Alternatively for fund managers who only want a value exposure at certain time, the ETF can be a quick and easy way of tilting a portfolio towards value.
The ETF will provide exposure to a specially developed index, the Russell Australia High Value Index. The index works by taking the Russell Australia Large Cap Index and assigning all stocks a value score and a growth score based on price to earnings ratios and medium term earnings growth. From this each stock is given a total value score, which then determines the weight of each stock in the index.
The Russell Australian Value ETF is the company's second ETF covering the Australian market. Its first, the Australian ETF, the Russell Australia High Dividend ETF, has amassed over A$140m ($137m) assets under management since its launch less than a year ago.
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