Quantitative Research

PMC Strategic Beta ETF Ranking Methodology

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The objective of our strategic beta ETF ranking methodology is similar to our regular ETF and Index fund ranking methodology. In particular, the methodology identifies products that have good characteristics in three areas: First, we look for products that are low cost; second, these products must be liquid; and third, we dissect the performance of these products to identify those that are the best in their peer group. The main difference between the regular ETF and strategic beta ETF ranking is in how we evaluate the performance. In the regular ETFs, we look for products with the smallest tracking error; however, on the strategic beta side, we add two more performance dimensions to the tracking error criterion: the risk-adjusted return and the exposure to the desired risk factor.