CoreShares today announced that it intends re-mandating its Top 40 Equally Weighted ETF (Share code: CSEW40) to track its flagship Multi-factor index. This index is designed and maintained by the renowned Scientific Beta, part of the EDHEC Business School. Scientific Beta recently announced that it now has 43 Bln USD tracking its Multi-factor indexes and recently won global ‘Index Firm of the Year’(2019 Risk Awards).

Gareth Stobie, MD of CoreShares, says, “Many of the early adopters of smart beta strategies have shifted from allocating to single factors such as value or size to a Multi-factor framework that incorporates all of the academically consensual factors namely: quality, size, low volatility, momentum and value”.

It has been demonstrated that a Multi-factor approach reduces the cyclicality of returns often associated with investment in single factors. For narrower markets such as South Africa it also reduces concentrated exposure to single stocks and sectors.

This diversified approach to factor investing is resonating with clients worldwide. In terms of research conducted by iShares, after dividend strategies, Multi-factor gathered the second most smart beta ETF flows (16.4 Bln USD) globally during 2018.

CoreShares’ South African equity offering will be consolidated into three distinct approaches:

  • Simple Market Exposure – our largest, and cheapest, ETF tracks the S&P South Africa 50 Index – a simple large cap index design which caps any stock at a maximum of 10%.
    Share code: CTOP50
  • Equity Income – CoreShares now offers both a local and global ETF tracking the S&P Dividend Aristocrats© Index methodology, this successful index family captures shares which have demonstrated long track records of paying and growing their dividend streams.
    Share code: DIVTRX
  • Multi-factor – combining the various factors into one product and ‘harvesting’ the drivers of return through time.
    Share code: SMART

The change is effective 8 May 2019 but requires a positive ballot from investors. Existing CSEW40 shareholders should note the 18 February 2019 SENS announcement and are urged to contact their stockbrokers in this regard.

This is one of a handful of changes CoreShares will be making to its ETF suite. Earlier this month it announced that its Mauritian domiciled ETFs (S&P500 and Global Property) will be primarily listed in South Africa realising cost efficiencies for clients.