5 min readBy Ron Koren ETF Insider
How does the JOET ETF work?
The JOET ETF is a specialized investment fund that focuses on a specific sector. This exchange-traded fund offers investors exposure to a range of companies in this sector.
The JOET ETF is managed by Virtus ETF Advisers LLC and seeks to replicate the performance of the JOET Index, which is designed to track quality large-capitalization companies listed in the United States. Indxx, LLC is the index provider responsible for determining the composition of the JOET Index, and it operates independently from both the ETF and its advisor, Virtus ETF Advisers LLC. The JOET Index includes common stocks and American depositary receipts (ADRs) and consists of the 500 largest U.S. securities by market capitalization, as determined by Indxx. Eligible securities are then screened and ranked based on momentum and quality scores, with momentum reflecting a security's tendency for relative performance persistence and quality emphasizing strong fundamentals. The 250 securities with the highest momentum scores form the selection universe, and the 125 securities with the lowest composite scores (based on quality factors) make up the components of the JOET Index. Securities within the index are equally weighted at each rebalance and reconstitution, which occurs quarterly.
Although the primary focus of the JOET ETF may not be on dividends, it still reflects the dividend distribution of the underlying index. Under normal market conditions, the Fund will invest not less than 80% of its assets in component securities of the Underlying Index, which is designed to track the performance of quality large-capitalization companies listed in the United States. These eligible securities are then screened and ranked based on a momentum and quality score, resulting in the formation of the Underlying Index. The dividend eligibility for JOET is influenced by the constituent companies' individual dividend policies and performances. The Underlying Index includes common stock and American depositary receipts (ADRs), with the 500 largest U.S. securities by market capitalization eligible for inclusion. Each security within the index is equally weighted at each rebalance and reconstitution, which occurs quarterly. While JOET does not seek to beat the performance of the Underlying Index and follows a passive investment approach, investors may still find it suitable for capital appreciation along with potential dividend returns.
Tracking the Quality Large-Cap Index is the primary objective of the JOET ETF. Under normal market conditions, the Fund allocates at least 80% of its assets to component securities of the Quality Large-Cap Index, which is designed to mirror the performance of high-quality, large-cap U.S. companies as determined by Indxx, LLC, the index provider. The index selection process involves screening and ranking eligible securities based on momentum and quality scores. The 250 securities with the highest momentum score form the initial selection universe, and the final components of the Underlying Index consist of the 125 securities with the lowest composite scores, following equal weighting at each rebalance. JOET offers investors a passive investment approach to closely approximate the Quality Large-Cap Index's performance, aiming for a correlation of 95% or better over time.
The correlation aspect of the Virtus MegaCap ETF (JOET) is centered on tracking the performance of quality large-capitalization companies listed in the United States. JOET aims to replicate the behavior of its underlying index, which is designed to prioritize stocks with strong fundamentals and persistent relative performance. With a focus on momentum and quality factors, JOET's correlation with the broader U.S. equity market is driven by its portfolio selection process. This correlation makes JOET a valuable tool for investors seeking exposure to large-cap stocks with strong fundamentals.
The JOET Sector ETF primarily invests in a diversified portfolio of U.S. large-capitalization companies. Under normal market conditions, this ETF aims to allocate not less than 80% of its assets to component securities of the Underlying Index, which is designed to track the performance of quality large-cap firms in the United States. The selection process for the Underlying Index involves screening and ranking eligible securities based on momentum and quality scores, with momentum reflecting relative performance persistence and quality emphasizing strong fundamentals. The ETF follows a passive indexing approach, seeking to replicate the Underlying Index's performance while maintaining a correlation of 95% or better. It may concentrate investments in specific industries to a similar extent as the Underlying Index, promoting diversification among its holdings.
The exposure characteristic of the JOET ETF is designed to provide investors with a diversified approach to the U.S. equity market. This ETF aims to replicate the performance of an index that includes a wide range of domestic and international companies listed on major U.S. exchanges, selected by a reputable index provider. JOET focuses on identifying companies with strong fundamentals and attractive income potential, offering investors exposure to a broad spectrum of sectors and regions within the American economy.
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