Designed to provide broad exposure to the Style Box – Large Cap Blend category of the market, the Northern Trust US Quality Large Cap ETF (QLC) is a smart beta exchange traded fund launched on 09/23/2015.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
There are some investors, though, who think it’s possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
Managed by Northern Trust Etfs, QLC has amassed assets over $1.14 billion, making it one of the larger ETFs in the Style Box – Large Cap Blend. This particular fund, before fees and expenses, seeks to match the performance of the Northern Trust Quality Large Cap Index.
The Northern Trust Quality Large Cap Index is designed to measure the performance of a universe of large capitalization securities which demonstrate characteristics of better quality, attractive valuation and positive momentum.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund’s return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for QLC are 0.25%, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.94%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund’s holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector – about 37% of the portfolio. Financials and Telecom round out the top three.
