What is the VUSE ETF?

VUSE ETF: Overview

The VUSE ETF, officially known as the Vident Core US Equity ETF, is a financial instrument that seeks to provide investors with exposure to a diverse portfolio of equity securities traded in the U.S. market. This ETF follows a passive investment approach, often referred to as indexing, where its performance is designed to mirror that of a specific index.
The index that the VUSE ETF tracks is the Vident U.S. Quality IndexTM. This index employs a rules-based and systematic strategy, comprising equity securities primarily traded in the U.S. market. The eligible companies for inclusion in this index must have market capitalizations of at least $100 million and meet specific liquidity requirements.

VUSE ETF: Index Composition

The Vident U.S. Quality IndexTM categorizes companies into three market capitalization segments: Giant, Large, and SMID (Small/Mid-Cap). The allocation to each segment is subject to certain limitations. For instance, the maximum allocation to a Giant market-capitalization company is 2%, while the allocation to a Large market-capitalization company is limited to 1%. Similarly, the allocation to a SMID market-capitalization company cannot exceed 0.5%.
In addition to market capitalization, the index considers corporate governance criteria and assigns a Corporate Governance Score to each company. Companies with better corporate governance receive higher allocations. This score is derived from various factors related to board structure, incentive alignment, and shareholder rights.

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VUSE ETF: Multi-Factor Model

The Vident U.S. Quality IndexTM employs a multi-factor model during its semi-annual reconstitution. This model scores and ranks stocks based on quality and momentum factors. The stocks' weights within the index are then determined by these factors, with adjustments based on company size and liquidity thresholds.
Furthermore, the quality and momentum attributes of companies are assessed using a proprietary multi-factor model. This model categorizes factors into quality and momentum composites, which help in evaluating various stock attributes. Factors such as profitability, profitability growth, cost of capital, and use of capital are taken into account to determine each stock's positioning within the index.

VUSE ETF: Investment Strategy

The VUSE ETF's investment strategy involves investing at least 80% of its net assets in U.S.-traded equity securities. The primary aim is to replicate the performance of the underlying index. However, the fund may use a representative sampling strategy when it deems it beneficial. This approach involves investing in a subset of securities that closely resemble the index's characteristics.
It's important to note that the correlation between the VUSE ETF's performance and the index's performance is expected to be around 95% or better, before factoring in fees and expenses.

Conclusion

In conclusion, the VUSE ETF offers investors exposure to a diversified portfolio of U.S.-traded equity securities through a passive investment approach. It tracks the Vident U.S. Quality IndexTM, which employs a multi-factor model to allocate weights to companies based on their quality and momentum attributes. While the VUSE ETF can be a valuable addition to an investment portfolio, it's crucial to conduct thorough research and consider your investment goals before making any decisions.

Disclaimer: This article is for informational purposes only and does not provide investment advisory services.

Sources:
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VUSE ETF issuer
VUSE ETF official page

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