Rydex Investments tripled the size of its exchange-traded fund lineup yesterday with six style ETFs, designed to give investors suped-up exposure to value and growth stocks. But are they suped-up enough to rise above the pack?
The new funds are based on the S&P Pure Style Indices, which extract only those stocks exhibiting strong growth or value characteristics from the S&P 500, S&P MidCap 400 and S&P SmallCap 600 indices. “Existing value and growth indexes do not differentiate between value and growth” in that they include companies that overlap the categories, explains Standard & Poor’s’ Srikant Dash, the creator of the new indices. The indices, and the new funds based on them, are “truly unique,” according to Steve Sachs, Rydex’s director of trading, offering “the purest exposure you can find in the marketplace.”
In addition to excluding blend stocks, the new ETFs also break from cap-weighting, which Rydex pioneered in the ETF space with its S&P Equal Weight ETF. The stocks in the new funds are not equal-weighted, but instead are weighted by their style score, which S&P uses to create the indices. Stocks included in the indices must score between 0.25 and 2.00, the maximum score. Between 100 and 200 stocks are in each index, according to Dash.
Fees on the new funds are capped at 35 basis points, and the American Stock Exchange, where the new ETFs trade, has launched options trading on all six funds.
“Rydex decided many years ago, when we got into the ETF business, we weren’t going to be a ‘me, too’ player,” Sachs said at a press briefing following the ETFs’ launch. But he acknowledges that, with 39 style-based funds already on the market, the style segment is “fairly well-covered now, particularly with these.” The new funds are certainly distinct from the style funds already out there, both in terms of composition and weighting, but will simply being “a better set of tools,” as Sachs calls them, be enough to set this suite of ETFs apart?
Dash notes that, since the indices were launched in September, about $1 billion in assets have been invested in index-based products, both in Rydex’s traditional index mutual funds and in a variety of institutional products. Still, in their first day of trading, none of the funds sold out their initial creation units.
