Russell Investments has released a new Australian equities exchange-traded fund (ETF) targeting institutional investors.
The Russell Australian Value ETF (RVL) charges an annual fee of 0.34 per cent and seeks to track the performance of the group's High Value Index, which is weighted to companies that typically demonstrate value characteristics.
"The index works by taking the Russell Australia Large Cap Index and assigning all stocks a value score and a growth score based on price to earnings ratios and medium term earnings growth," Russell portfolio manager Scott Bennett said.
"From this, each stock is given a total value score, which then determines the weight of each stock in the index."
Russell's research on value premiums showed that over time passive value based strategies had typically delivered a premium of 1.5 per cent to 3 per cent over the broad market in Australia, he said.
RVL will be the first style-based ETF to hit the Australian market and will have specific applications for institutions, he said.
"It will aim to complement rather than compete with managed funds and can potentially be used as a plug for an active manager, while a new manager is being found," Bennett said.
"Alternatively for fund managers who only want a value exposure at certain time, the ETF can be a quick and easy way of tilting a portfolio towards value."
"Another specific institutional use for RVL is for short term cash management. RVL provides a more targeted, easy to implement, exposure to help institutions manage shorter term cash positions."
"In addition, RVL is well-suited to advisers and brokers, particularly those with a style based approach."
The ETF will hold 40 to 60 stocks, Russell's director of ETF product development Amanda Skelly said. Top holdings include Commonwealth Bank of Australia, Westpac, Telstra, BHP Billiton and Woolworths.
The group's first Australian ETF, the Russell Australia High Dividend ETF, has gained over $140 million in assets under management since its launch less than a year ago.
