Oppenheimer Fund in the Playground of ETF

OppenheimerFunds, Inc. was spawned /spun off from Oppenheimer Management Corp. It is now a subsidiary of MassMutual Financial Group. Keeping up with the trend of growing ETF, OppenheimerFunds has issued 18 ETFs to the market and they are mostly in two batches – 2008 and 2017 respectively.

RWK, RWJ, and RWL are Oppenheimer mid-cap revenue, small-cap revenue and large-cap revenue ETFs, with $362, $478 and $870 million AuMs accumulated. Their strategy is to take the S&P 500 and reweight each company by its revenue rather than its market cap. It ignores profit margins. Hence, technology, or research-phase biotech/pharmaceutical companies won’t be weighted as much as retail/consumer giant companies. Oppenheimer Financials Sector Revenue ETF – RWW- takes financial sectors within S&P 500 and reweight them based on total revenues too, so large, high-revenue financial firms are favored at the expense of the smaller ones. RWW as of today has raked in $53 million AuM.

The Oppenheimer Ultra Dividend Revenue (RDIV) tracks an index that selects the 60-highest-yielding stocks from the S&P 900 and weights them by revenue. The strategy produces a high portfolio yield, but be wary the exposure are sourced from a small selection universe – 60 holdings. The inception date of RDIV is 10/01/0213, the expense ratio is 0.39%, which was cut in Oct. 2016 to be more competitive in the market. It attracts AuM of close to $500 million early 2018.

In 2016, Oppenheimer also tried ESG theme with Oppenheimer Global ESG Revenue ETF (ESGF). The selection process begins with the MSCI ACWI Index, and selects the top 50% of companies by their environmental, social, and governance (ESG) characteristics as determined by MSCI ESG Research. These constituents are then weighted according to revenue. Individual issuer weights are capped at 5% of the fund’s weight. There are no sector or country restraints beyond the issuer cap. As of today, the AuM is just $23 million.

In November 2017, Oppenheimer rolled out 8 single factor ETFs, targeting five factors in all: value, momentum, quality, low volatility and size in a dynamic way, depending on whether the economy and market are in an expansion, slowdown, contraction or recovery phase

Oppenheimer Russell 1000 Dynamic Multifactor ETF (OMFL), 0.29%
Oppenheimer Russell 2000 Dynamic Multifactor ETF (OMFS), 0.39%
Oppenheimer Russell 1000 Momentum Factor ETF (OMOM), 0.19%
Oppenheimer Russell 1000 Quality Factor ETF (OQAL), 0.19%
Oppenheimer Russell 1000 Size Factor ETF (OSIZ), 0.19%
Oppenheimer Russell 1000 Value Factor ETF (OVLU), 0.19%
Oppenheimer Russell 1000 Low Volatility Factor ETF (OVOL), 0.19%
Oppenheimer Russell 1000 Yield Factor ETF (OYLD), 0.19%

They claimed to employ a bottom-up approach that combines factors at the stock level, while the more typical top-down approach combines factors at the index level. The OppenheimerFunds ETFs are the first to use a bottom-up dynamic multifactor methodology. As of Sept. 30, OMFL’s index included 715 components, while OMFS’ included 1,220 components. A strong rival – J.P. Morgan- has launched similar single-factor ETFs, tracking indexes based on the Russell 1000. But their expense ratio is just 0.12%, much lower than those of OppenheimerFunds. We assume the “bottom-up” approach makes it hard to lower the labor cost, hence the expense ratio.

Overall, the funds’ ETF products don’t look like faring well in this fierce competitive ETF space, it cannot offer a much low expense ratio as Goldman Sachs, or J.P. Morgan can, neither was Oppenheimer able to come up with unique/creative strategies to offer to the market a sought-after, star ETF.

 

 

 

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