Aussie ETF provider BetaShares has launched the BetaShares Global Quality Leaders ETF (QLTY AU) on Australian Securities Exchange.
The ETF offers exposure to a globally diversified portfolio of high quality companies.
The fund provides exposure to a diversified portfolio of high quality companies listed in developed markets globally, excluding Australia.
It is the provider’s fiftieth ASX-traded fund.
The underlying reference for the new fund is the iSTOXX MUTB Global ex-Australia Quality Leaders Index which is derived from the constituent universe of the STOXX Global 1800 ex Australia Index.
The index methodology initially separates firms from this parent into three segments depending on their listing region: North America, Europe, or Asia Pacific.
Stocks are then ranked, relative to their region, on four metrics of quality: return on equity, financial health (total debt divided by the sum of shareholder’s equity and total debt), cash flow generation, and business stability (standard deviation of net income over the last five years divided by shareholder’s equity). Stocks in the bottom half of their regional ranking by return on equity as well as stocks in the bottom 5% of the other metrics are excluded.
The remaining stocks are then assigned a composite score based on a 40% allocation to their return on equity rank and a 20% allocation to each of their other three ranks.
Finally, the 150 stocks from across all three regions that have the highest composite scores are selected for inclusion and weighted by free float-adjusted market capitalization, subject to a constituent cap of 2%.
As of the end of October 2018, the index had delivered a return of 13.3% per annum compounded over the past ten years, compared to the 8.8% per annum return for the MSCI World Index. In this same period, the index has also benefited from significantly lower drawdowns, with a maximum drawdown approximately half of that experienced by the MSCI World Index.
Alex Vynokur, CEO, BetaShares, commented, “Since we launched our first ETF in December 2010, we’ve made it our mission to expand the range of investment solutions available to Australian investors and to utilise the convenience and accessibility of exchange traded funds. With 50 exchange-traded products launched to date, we believe we’re certainly on our way to delivering on that promise.”
“QLTY gives investors access to a cost-effective investment that they can use as a core portfolio allocation for international equities,” added Vynokur. “The quality score methodology used by the fund aims to produce superior long-term performance compared to benchmark global equities indices. In addition, quality companies have historically exhibited reduced declines during market falls.”