This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Vident Brings Its Second Smart-Beta ETF to Market

NEW YORK (TheStreet) -- Late last year, new ETF provider Vident entered the space with arguably the most successful fund launch in the history of the industry. Its Vident International Equity Fund (VIDI) attracted more than $100 million in assets in the first few days of trading. Now, less than three months later, it has amassed almost $600 million.

VIDI employs a proprietary screening process of risk-weighting foreign countries. It then allocates to stocks that have what Vident views as favorable fundamental attributes.

On the heels of VIDI's success, the firm this week has launched the Vident Core U.S. Equity Fund (VUSE). The fund will seek to mitigate the risks it sees in U.S. equity investing. Those risks include valuation and poor financial reporting in market-cap weighted funds. VUSE will seek to add value over market-cap weighting by applying "principles-based investment decisions expressed through innovative risk design," according to the company.

A little more tangibly, VUSE uses a four-layer approach to construct VUSE. The first layer is a simple market-cap and trading-volume screen. The fund requires that prospective stocks have at least $500 million in equity and an average daily dollar volume of $1.5 million in shares traded.

The second layer takes the top 80% from the first step, based on a proprietary assessment of expense recognition, financial reporting and corporate governance. The third layer considers risk premia, such as favorable valuations and positive momentum. Finally, the fourth layer considers the stocks' industry sector. VUSE buys the highest-scoring 500 companies, "risk-balanced across sectors, while maintaining industry norms for each sector's weighting." So VUSE won't make large sector bets.

Although VIDI and VUSE employ slightly different methods, they both build indexes around qualitative factors. ETF Trends, the well-regarded industry Web site, places Vident's funds in the smart-beta category. Smart-beta funds cull stocks from broad-based index benchmarks, in the hopes of outperforming the more traditional market-cap weighted funds.

It bears noting that while VIDI has been very successful in attracting assets, its performance in an admittedly very short time frame has been held back by its relatively large exposure to emerging markets. At year's end, 49% of VIDI's assets are in emerging markets -- more, if Taiwan and South Korea are considered to be emerging. By comparison, the iShares Core MSCI Total International Stock ETF (IXUS), a proxy for global stocks excluding the U.S., only allocates 16% to emerging markets.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
VUSE $24.95 0.00%
VIDI $20.90 0.00%
AAPL $95.18 0.00%
FB $117.43 0.00%
GOOG $692.36 0.00%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs