Principal International Adaptive Multi-Factor ETF
Principal U.S. Large-Cap Adaptive Multi-Factor ETF
Principal U.S. Small-Cap Adaptive Multi-Factor ETF
SUMMARY & ANALYSIS
All three apply a proprietary methodology to their "base" indices to overweight and underweight stocks based on value, quality, momentum, and volatility.
Iowa-based Principal is a bit late to the factors investing game, but these are necessary offerings to complete their product lineup.
Principal currently has 10 listed active and passive ETFs with around USD$4B in AUM translating into USD$10M in annual gross revenues.
Tickers: TBD
Exchange: TBD
Expense ratio: TBD
Original filing date: February 9, 2021
Effective date: April 26, 2021
Listing Date: TBD
CUSIP: TBD
Active: Yes
Index: Not applicable
Universe/Base Indices/Benchmarks:
MSCI World Ex-U.S. Index
S&P 500 Index
S&P 600 Index
Investment Objective:
The Funds seek long-term growth of capital.
Investment Strategy:
Proprietary methodology to rank and select stocks from their respective universe indices on the following factors:
- Value
- Quality
- Momentum
- Volatility
Adviser: Principal Global Investors, LLC
Prospectus is here.
MORE ETF HEARSAY
Principal International Adaptive Multi-Factor ETF
Principal Investment Strategies
Under normal circumstances, the Fund invests at least 40% of its net assets, plus any borrowings for investment purposes, in securities of foreign companies. The fund invests in securities regardless of market capitalization size (small, medium or large). The Fund actively trades portfolio securities.
For security selection and portfolio construction, Principal Global Investors, LLC ("PGI") uses a proprietary quantitative model. The model is designed to identify and rank equity securities in the MSCI World Ex-U.S. Index (the "Index") that correspond to factor categories including the following:
• Value companies - securities with low prices relative to their fundamental value, measured by such metrics as earnings yield, free cash flow yield, and sales yield.
• Higher quality companies – securities ranked based on metrics such as return on equity, sales growth, earnings growth, and balance sheet measures of quality (such as lower debt and accruals).
• Higher momentum companies - securities ranked by evaluating recent performance.
• Lower volatility companies – identified using the last 12-month standard deviation of returns (in other words, how much such returns vary).
The model incorporates a proprietary rules-based methodology that identifies the current market risk regime as “lower,” “higher and increasing,” or “higher and decreasing” and then weights securities within and among the factor categories based on the prevailing market regime. During "higher and decreasing" market environments, for example, the model is expected to correspond more closely to the weights used in the Index itself; however, in "lower" and "higher and increasing" environments, the model’s selection and weighting is expected to differ from the Index in an effort to outperform the Index returns after fees and expenses. For certain securities, the model assigns weights equal to that of the Index in all risk regimes. The proprietary model and fund holdings are updated and rebalanced periodically, and PGI expects to adjust the model over time.
Principal U.S. Large-Cap Adaptive Multi-Factor ETF
Principal Investment Strategies
Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of U.S. companies with large market capitalizations at the time of purchase. For this Fund, companies with large market capitalizations are those within the market capitalization range of the companies in the S&P 500 Index, which as of December 31, 2020, was between approximately $3.2 billion and $2.3 trillion. The Fund actively trades portfolio securities.
For security selection and portfolio construction, Principal Global Investors, LLC ("PGI") uses a proprietary quantitative model. The model is designed to identify and rank equity securities in the S&P 500 Index (the "Index") that correspond to factor categories including the following:
• Value companies - securities with low prices relative to their fundamental value, measured by such metrics as earnings yield, free cash flow yield, and sales yield.
• Higher quality companies – securities ranked based on metrics such as return on equity, sales growth, earnings growth, and balance sheet measures of quality (such as lower debt and accruals).
• Higher momentum companies - securities ranked by evaluating recent performance.
• Lower volatility companies – identified using the last 12-month standard deviation of returns (in other words, how much such returns vary).
The model incorporates a proprietary rules-based methodology that identifies the current market risk regime as “lower,” “higher and increasing,” or “higher and decreasing” and then weights securities within and among the factor categories based on the prevailing market regime. During "higher and decreasing" market environments, for example, the model is expected to correspond more closely to the weights used in the Index itself; however, in "lower" and "higher and increasing" environments, the model’s selection and weighting is expected to differ from the Index in an effort to outperform the Index returns after fees and expenses. For certain securities, the model assigns weights equal to that of the Index in all risk regimes. The proprietary model and fund holdings are updated and rebalanced periodically, and PGI expects to adjust the model over time.
Principal U.S. Small-Cap Adaptive Multi-Factor ETF
Principal Investment Strategies
Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of U.S. companies with small market capitalizations at the time of purchase. For this Fund, companies with small market capitalizations are those within the market capitalization range of the companies in the S&P 600 Index, which as of December 31, 2020, was between approximately $146.6 million and $6.3 billion. The Fund actively trades portfolio securities.
For security selection and portfolio construction, Principal Global Investors, LLC ("PGI") uses a proprietary quantitative model. The model is designed to identify and rank equity securities in the S&P 600 Index (the "Index") that correspond to factor categories including the following:
• Value companies - securities with low prices relative to their fundamental value, measured by such metrics as earnings yield, free cash flow yield, and sales yield.
• Higher quality companies – securities ranked based on metrics such as return on equity, sales growth, earnings growth, and balance sheet measures of quality (such as lower debt and accruals).
• Higher momentum companies - securities ranked by evaluating recent performance.
• Lower volatility companies – identified using the last 12-month standard deviation of returns (in other words, how much such returns vary).
The model incorporates a proprietary rules-based methodology that identifies the current market risk regime as “lower,” “higher and increasing,” or “higher and decreasing” and then weights securities within and among the factor categories based on the prevailing market regime. During "higher and decreasing" market environments, for example, the model is expected to correspond more closely to the weights used in the Index itself; however, in "lower" and "higher and increasing" environments, the model’s selection and weighting is expected to differ from the Index in an effort to outperform the Index returns after fees and expenses. For certain securities, the model assigns weights equal to that of the Index in all risk regimes. The proprietary model and fund holdings are updated and rebalanced periodically, and PGI expects to adjust the model over time.
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