State Street Global Advisors (SSGA) has extended its $6.8bn Aristocrats range with a pair of quality factor ETFs covering US and developed market equities.
The SPDR S&P 500 Quality Aristocrats UCITS ETF (QUS5) and the SPDR S&P Developed Quality Aristocrats UCITS ETF (QDEV) are listed on Deutsche Boerse and the London Stock Exchange with total expense ratios (TERs) of 0.25% and 0.35%, respectively.
By focusing on quality, the duo has a slightly different flavour to the five existing SSGA Aristocrats ETFs available in Europe, all of which target stocks with high dividend yields.
QUS5 seeks to replicate the performance of S&P 500 Quality FCF Aristocrats index, while QDEV tracks the S&P Developed Quality FCF Aristocrats index.
Each index seeks to capture companies with “higher quality characteristics” than their respective parent indices: the S&P 500 and the S&P Developed LargeMidCap.
To be included, stocks must demonstrate at least ten years of positive free cash flow (FCF), as well as a high FCF margin and FCF return on invested capital.
Matteo Andreetto, head of intermediary client coverage – Europe, commented: “High cash flow enables companies to make sustained strategic investments and acquisitions and to return capital via dividends, buyback, and/or debt reduction.
“These two new ETFs present a compelling opportunity for investors seeking enhanced risk-adjusted returns relative to traditional indices, particularly in today’s market where volatility is driven by geopolitical and economic uncertainty.”
Rupert Watts, head of factors and dividends at S&P Dow Jones Indices, added: “By focusing on companies that excel in long-term FCF generation, these indices are designed to primarily track high-quality firms and distinguish themselves from other FCF-based indices in the market, which are generally yield-focused and exhibit a strong value tilt.”
