Doing due diligence on an ever-growing number of ETFs is no easy task. There are no shortcuts to properly compare and contrast funds in search of the right one for you and/or your client.
The good news is that there are a number of interesting tools and data analytics services to help you with that task.
There are many fintech solutions out there that have cool capabilities, but our goal today is to dive only into a few that you might like to check out.
This company has more than 10 solutions/offerings to help advisors and asset managers figure out what factor exposures ETFs have, as well as environmental, social and governance (ESG) information on different funds.
If factor-focused and ESG investing are something you and your clients are looking to do, this firm has several tools that could be helpful with your due diligence—Factor Return Attribution, Portfolio Analyzer, Similyzer and ESG Analytics, to name a few.
One of the offerings is Markets Analyzer, which evaluates the performance of various equity factors across geographies, done on a quarterly basis.
“This analysis helps advisors understand the performance head winds and tail winds for common factors often used to describe the philosophy behind thousands of mutual funds and ETFs,” said Tom Idzal, managing director at Style Analytics. “Much in the same way investors need to understand sector or country performance when considering their investments, Style Analytics shines the same light on factors using their industry standard lens.”
Here’s an example of what this looks like analyzing the U.S. market in Q2 2020. The chart below shows how common factors (color coded) outperformed or underperformed (bars going to either direction) relative to neutral. Idzal notes that the chart also helps to “break down components of each factor category to help determine why similarly themed portfolios might have behaved differently during the same stretch of time.”
For a larger view, please click on the image above.
This quarterly analysis of factor performance—along with a webcast detailing the results—is available for free here: Style Analytics - Quarterly Factor Performance Results. It can also be custom-created over any time frame if you are a subscriber.
Another interesting offering—quite unique—is their Peer Insights.
The firm essentially creates a baseline of factor exposure across large peer groups of mutual funds and ETFs with millions of data points. From that baseline, it offers the ability to compare any fund with its competitors from a factor exposure perspective.
Factors are big drivers of performance, and factor tilts can often go unobserved in a portfolio of, say, large cap stocks. This apples-to-apples comparison unearths any factor exposure or tilts that a fund may have, which may explain why it’s performing the way it is, and puts it in the context of the broader segment as well as in relation to any other competing ETF you choose. It’s like playing “spot the difference” in two otherwise similar funds.
What you quickly see is that despite both ETFs being “value” funds, they are very different in how deep into value they go, as well as in their exposure to the volatility factor, high yield, growth and momentum. Over time, these differences impact the path of returns.
For a larger view, please click on the image above.
This type of analysis is widely used by large institutions, but Style Analytics has made it accessible—as well as intuitive, colorful and cool—to advisors and investors.
ETF Action is one of the younger ETF data analytics to come to market, the brainchild of three former ALPS folks.
The platform is a treasure trove of all sorts of things you might want to know about ETFs, fueled by FactSet data. As the website states, the firm sets out to offer “actionable ETF research.”
What’s nifty here is the functionality of the search engine itself. There are more ways to slice and dice the data than you can imagine—from a single stock, to P/E ratios, to what’s in the Data Analytics tab.
Take, for example, FTA, the value ETF we discussed above. Once you enter that ticker in the data analytics tab, it populates all the details about the fund—each tab is clickable with myriad information from asset flows, to comparables, to risk statistics, to holdings and so on.
For a larger view, please click on the image above.
At the right-hand corner, you can click on “Equity Visualizer” to see every security that’s in this ETF portfolio, grouped by sector or industry or region, or by country. That list of holdings can be displayed to you in one of three ways—histogram, scatter plot or a heatmap (below):
For a larger view, please click on the image above.
Those who are stock pickers at heart can also sort the data in what’s called the “ownership screener,” and compare, say, FTA to VONV. You can even find out how many companies these two value ETFs agree on as value, in a tool called ETF Overlap Analyzer. Here’s what that looks like:
The data tells you that FTA and VONV have a combined 1,026 holdings, but they only agree on 180 names—the value portfolios have only a 31.3% overlap. Below the tables, the site then offers you the comprehensive list of all holdings in these two funds.
You can also access an “earnings scorecard” for any ETF, which will show, in a given earnings cycle, how many companies within that ETF missed or beat earnings, how many reported, etc.
The platform allows for you to spot trends, do market research and provide detailed customization across numerous metrics and categories. ETF Action also offers five model portfolios built around factors, sectors, themes and regions that can be an interesting road map to advisors.
And there’s, of course, ample research, from models to playbooks to macro insights to daily briefs—some of which you can receive daily in your email.
Full access to this platform will cost you an annual fee, but the firm also offers free limited access to some of its capabilities, and it allows you to use the entire offering for free for 14 days.
Here at ETF.com, we offer a few free-to-use tools that help with ETF due diligence, fueled with data from FactSet.
One of these tools is the ETF Stock Finder. It’s super easy to use. Once you click into the tool, which can be found on the link above, or at www.etf.com under the “ETF Tools & Data” tab, you will come across this:
For a larger view, please click on the image above.
That interface offers you a search tab in which to enter the ticker of the company you are looking for, and it also tells you what companies folks are searching for the most, as well as which stocks are the most widely held across the ETF universe, and, finally, the most recent IPOs.
Say you want to see what ETFs have the most exposure to Moderna because you are excited about this stock’s performance or potential given its role in the development of vaccines. (Or, counter to that, say you want to avoid this company because you think it’s overvalued, so you want to steer clear of any ETFs that own it.)
You would enter Moderna’s ticker (“MRNA”) on that search tab, and you would find the following summary detailing how many ETFs own Moderna, who’s the biggest holder in percentage terms and in number of shares (dollar value):
For a larger view, please click on the image above.
Below this handy summary, you would get the comprehensive list of ETFs and their respective allocations to Moderna (all 92 ETFs, some of which are shown below):
For a larger view, please click on the image above.
As would be expected, Moderna is found in several biotech and healthcare ETFs, but it’s also in an IPO fund, in some broader large and midcap funds, and even in asset allocation strategy.
Knowing what ETFs own the stock you are looking for is a good first step in doing your ETF due diligence.
If there’s a fintech tool or solution you really like, I’d love to hear about it. Please shoot me a line at cmurphy@etf.com.
