Global Consistency in Factor Investing: BlackRock’s Index Switch
BlackRock Inc. is taking a significant step towards achieving global consistency in its factor investing range by switching the indexes of three multifactor ETFs. The move affects the iShares STOXX World Equity Multifactor UCITS ETF, iShares STOXX Europe Equity Multifactor UCITS ETF, and iShares STOXX US Equity Multifactor UCITS ETF, which collectively manage over $948 million in assets.
A Shift Towards STOXX Indexes
These ETFs will now track STOXX indexes instead of MSCI indexes, resulting in changes to their names and investment strategies. The new indexes will incorporate a low volatility factor and a different weighting methodology, moving away from neutral equal weight to an asset allocation factor framework. This shift aims to provide investors with a more diversified exposure while controlling for systematic risk and integrating sustainability principles.
Enhanced Methodology
Axel Lomholt, general manager at STOXX, emphasized the benefits of the new methodology, stating that the STOXX Equity Factor Screened indexes offer investors a unique approach to target long-term potential outperformance while controlling for risk. The changes are designed to provide a more robust investment framework for investors seeking to balance returns with sustainability considerations.
ESG Investment Rules
In a separate development, BlackRock’s aggregate bond ESG ETF has undergone changes to its index to comply with France’s stricter ESG investment rules under the Socially Responsible Investment (ISR) label introduced in late 2023. This move demonstrates BlackRock’s commitment to adapting to evolving regulatory requirements and investor preferences.
BlackRock’s ETF Landscape
In the U.S. markets, BlackRock boasts an impressive presence with 438 ETFs traded, managing a total of $3.04 trillion in assets. The firm’s ETF offerings span fixed income, equity, asset allocation, currency, and commodities, with an average expense ratio of 0.3%. The iShares Core S&P 500 ETF stands out as BlackRock’s largest U.S.-listed ETF, with assets under management of nearly $560 billion.
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