Invesco has introduced a new actively managed ETF in Europe providing low volatility, low carbon exposure to a socially responsible portfolio of global equities.
The fund’s investment approach is based on proprietary models developed by the Invesco Quantitative Strategies (IQS) team.
The Invesco Quantitative Strategies Global Equity Low Volatility Low Carbon UCITS ETF has been listed on London Stock Exchange in US dollars (LVLC LN) and pound sterling (LVLG LN) as well as on Deutsche Börse Xetra (LVLC GY) and Borsa Italiana (LVLC IM) in euros.
The fund has come to market with approximately $25 million in assets.
Beginning with an initial universe of large and mid-cap developed market stocks, the ETF screens out violators of international norms and companies with significant operations linked to nuclear power, coal-based power, oil & gas, controversial weapons, military weapons, civilian firearms, tobacco, stem cell research, and genetic engineering.
Invesco then enacts a two-step process to build the fund’s portfolio. Firstly, the firm utilizes an optimization process to construct a “Low Volatility Anchor Portfolio” (LVAP) which targets a minimum reduction in portfolio volatility and carbon intensity compared to the benchmark MSCI World Index while maintaining country and sector weights that are within 10% of this benchmark.
Secondly, using proprietary factor models developed within its Quantitative Strategies team, Invesco deploys another optimization to enhance the LVAP’s exposure to value, quality, and momentum factor risk premia while maintaining consideration of low volatility and low carbon criteria.
The portfolio will typcially be reviewed on a monthly basis with reconstitution and rebalancing occurring based on the tradeoffs between expected payoff and transaction costs.
As of 21 July, stocks from the US accounted for nearly two-thirds (62.6%) of the ETF’s total allocation with the next-largest country exposures being Japan (12.1%), Canada (5.5%), and Switzerland (4.2%).
Notable sector exposures included health care (19.8%), information technology (18.8%), financials (14.0%), consumer staples (13.8%), and communication services (10.9%).
The ETF comes with an expense ratio of 0.25% and is classified as an Article 8 product under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).