BlackRock expands its iShares Factor ETF suite to include momentum, quality and value strategies in Australia

Drawing on over 40 years’ experience in managing systematic and factor-based investing strategies globally, BlackRock Australia has announced its intent to add momentum, quality, and value ETFs to the iShares Factor ETF suite in the local market.

Priced at 25bps for the non-hedged versions of the products, the newly expanded iShares Factor ETF suite will offer Australian advisers and investors a low-cost way to access their preferred investment style in line with their broader objectives.

The funds will be available on Cboe later this month, making them the inaugural iShares products listed on Cboe in Australia. This reflects iShares broader commitment to support the growth of the Australian ETP ecosystem which remains underpenetrated compared to global counterparts.[1]

As a first-of-its-kind in the Australian market, iShares MSCI World ex Australia Momentum ETF (IMTM) tracks the MSCI World ex Australia Momentum Index that identifies large-and mid-cap developed global companies that have performed strongly over the last 6-12 months on a risk-adjusted basis. Investors may seek to invest in momentum style strategies to seek higher expected returns, capitalise on upward-trending markets, and as a complement to other style strategies.

Priced c. 30% lower than its nearest competing ETF in Australia, the iShares MSCI World ex Australia Quality ETF (IQLT) tracks the MSCI World ex Australia Quality Sector Capped Select Index that identifies large-and mid-cap developed global companies that have healthy balance sheets, strong profit margins, and a track record of consistent year-on-year earnings growth. Investors generally seek to invest in quality style strategies to capture this historically rewarded factor and to gain exposure to firms that may be better able to weather a higher interest rate or slowing growth environment.

Priced c. 10% lower than its nearest competing ETF in Australia, iShares MSCI World ex Australia Value ETF (IVLU) tracks the MSCI World ex Australia Enhanced Value Index that identifies undervalued large-and mid-cap developed global companies based on fundamentals. Investors generally seek to invest in value style strategies to increase their portfolio’s expected returns over the long term, especially during periods of economic recovery.

In terms of sector weightings, both IVLU and IQLT apply sector caps and aim to target stocks across all sectors to minimize any unintended sector biases. By applying sector constraints relative to the market, investors may be able to take advantage of factor premiums while minimising unintended sector bets. Additionally, investors have the option of choosing the Australian hedged versions of both products, iShares MSCI World ex Australia Quality (AUD Hedged) ETF (IHQL) and iShares MSCI World ex Australia Value (AUD Hedged) ETF (IVHG), priced at 28 bps, if they want to reduce the volatility of foreign currency movements.

These funds will join the iShares Edge MSCI World Minimum Volatility ETF (WVOL), bolstering the Australian iShares Factor ETF suite. Enhancements will also be made to WVOL including a fee reduction from 30bps to 25bps and a benchmark change to exclude Australia to bring it line with the newly expanded suite.

Chantal Giles, Head of Wealth, BlackRock Australasia said, “Our intent to broaden our iShares Factor ETF suite by adding momentum, quality and value strategies will help Australian advisers and investors to capitalise on market volatility and build more resilient portfolios.

“Style investing enables investors to adjust their portfolio allocations for different points in the market cycle and can play a complementary role by providing additional portfolio diversification. BlackRock is proud to offer one of the broadest range of low-cost factor ETFs available in the Australian market.”

Tamara Stats, iShares ETF and Index Investments Specialist, BlackRock Australasia said, “With challenging market conditions set to continue in 2024, Australian advisers and investors now have a broad selection of style ‘tilts’ available through the iShares Factor ETF suite, enabling them to be more dynamic with equities exposures and steer clear portfolio outcomes.

“IMTM enables investors to ride positive momentum and can potentially outperform during periods of economic expansion. IQLT and IHQL aim to capture global stocks with capital growth potential even during periods of economic slowdown while IVLU and IVHG can offer portfolio resilience by giving investors targeted exposure to fundamentally sound, undervalued global stocks. These strategies will provide investors with additional building blocks for their portfolios, contributing to greater portfolio resilience.”

As one of the largest factor ETF providers in the US, BlackRock has 40+ years of experience in managing systematic and factor-based investing strategies across asset classes.