The new MarketGrader ETFs include MarketGrader 40, 100 and 200, three ETFs based on a basket of top-rated North American securities. Another three are due to be launched in the beginning of October. These will be the MarketGrader Large Cap, Mid Cap and Small Cap funds based on the top 100 North American stocks within each market capitalisation category.
Daniel Freedman, director, SPA ETF Plc, comments: âToday SPA launched its first enhanced ETFs to the investment community. Todayâs listing of SPAâs MarketGrader ETFs on the London Stock Exchange will, for the first time, provide investors on the LSE with access to next generation Exchange Traded Funds â and access to the consistently higher returns that these products have shown to be able to deliver.â
Freedman continues: âSince the MarketGrader 40 index went live in 2003 it has achieved a return of 67.75%, compared to the S&P 500, which has returned 29.63% (to 7th September 2007). We look forward to maintaining such positive returns and see added investor benefit by providing investors with our Ã la carte menu of Spa MarketGrader ETFs.â
David Shrimpton, head of product management and development, London Stock Exchange, says: "This series of ETFs from SPA ETF Plc marks a significant development in the UK ETF marketplace, presenting the growing number of investors interested in using ETFs with a new opportunity to outperform the predominantly market capitalisation-based indices while still retaining the low cost diversification of a tracker. SPAâs new series of ETFs demonstrates the choice and innovation that has been unleashed by the removal of the old stamp duty tax barrier to ETF issuers.â
The MarketGrader indices are unique because of the sophisticated methodology of weighting and evaluating the stocks. Unlike standard indices, which evaluate stocks based on fixed parameters, MarketGrader uses 24 quantitative filters within four main areas (growth, value, profitability and cash flow) to carry out a fundamental evaluation of more than 5,600 North American stocks. Each MarketGrader index also periodically adjusts its holdings to ensure an equal weighting for, and an optimal grading of, all stocks. This advanced process helps to avoid the pricing anomalies that arise out of traditional market-cap weighted indices.
All MarketGrader indices go through a significant period of back-testing (at least 3.5 years) before their launch as ETFs. Similarly, the Alpha-generation capabilities of each must be demonstrated prior to market launch.