Multi-factor ETFs vs. Equal Weight Multi-Factor Portfolios
In last week’s newsletter, we discussed native value-momentum ETFs vs. an equal weight value and momentum two factor portfolio. Our conclusion is that a native value-momentum doesn’t add much more value, at least based on the short history of these ETFs.
In this newsletter, we continue to look at ETFs that are constructed based on more factors and their performance compared with equal weight portfolios.
The multi-factor ETFs
By far, the most successful multi-factor ETF is Goldman Sachs’ ActiveBeta ETFs. Its representative one is GSLC (Goldman Sachs ActiveBeta US LgCp Eq ETF). Based on Goldman Sachs, the so called ActiveBeta ETFs are based on the following four factors:
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