Exchange-Traded Funds With New Spin

As exchange-traded funds are sliced into increasingly smaller segments, industries and regions, Sean O'Hara and his team have taken a novel approach.

As president of RevenueShares Investor Services, O'Hara has helped lead the way in designing ETFs with a new spin. The firm has three ETFs on the market: the RevenueShares Mid Cap Fund(RWK Quote), the RevenueShares Large Cap Fund(RWL Quote) and the RevenueShares Small Cap Fund(RWJ Quote). They track the S&P 400, S&P 500 and S&P 600 indexes, yet they are weighted based on annual revenue rather than market capitalization.

The funds, which rebalance yearly, are rooted in the idea that revenue is a metric less prone to manipulation. "We think we can combine traditional market-cap-weighted index funds with a revenue-weighted strategy to extract excess returns," said O'Hara. "We use revenue because it has proven to generate the highest returns among the factors that we considered for rebalancing." ...