performance of the GS Risk-Adjusted Return U.S. Large Cap Index.
Total Annual Fund Operating Expenses: 0.55%
Principal Investment Strategies
The Fund is an index-based exchange traded fund (“ETF”) that seeks investment results that closely correspond to the total return of the Index. The Index includes U.S. securities within the Russell 1000® Index selected in accordance with the proprietary methodology described below.
The Fund’s investment adviser, ALPS Advisors, Inc. (the “Adviser”), uses a “passive” or indexing approach to try to achieve the Fund’s investment objective. Unlike many other funds, the Fund does not try to “beat” the Index it tracks and does not seek temporary defensive positions when markets decline or appear overvalued. The Fund will invest at least 80% of its total assets in the securities that comprise the Index. The Fund is required to provide 60 days’ notice to its shareholders prior to a change in this policy. The Fund’s investment objective and the Index which the Fund seeks to track may be changed without shareholder approval.
The Index is designed to reflect the performance of a hypothetical portfolio of U.S. stocks that are anticipated to have the highest risk-adjusted returns based on a methodology (the “Methodology”) developed by Goldman, Sachs & Co. (the “Index Provider”). The Methodology selects a target of 50 stocks for inclusion in the Index from a subset of U.S. equity securities within the Russell 1000® Index that meet the minimum analysts coverage, liquidity and market capitalization requirements set forth below. The Russell 1000® Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000® Index and includes approximately 1000 of the largest capitalization securities in such index.
The Methodology classifies the stocks by sector, then sorts by the highest risk adjusted returns within each sector. Risk-adjusted returns are based on I/B/E/S (Institutional Brokers’ Estimate System) consensus 12-month target prices adjusted by their six month “realized” volatility (as defined below). All stocks are equally weighted and the number of stocks from each sector is determined by sector weightings using a risk-parity approach. Under this approach, the volatility of each sector is computed based on realized six-month volatility and sectors with relatively high realized volatility contribute proportionately fewer securities while sectors with relatively low realized volatility contribute proportionately more securities. The Index is rebalanced semiannually.
Stocks eligible for inclusion in the Index are constituents of the Russell 1000 Index which meet all of the following criteria at the close of the relevant determination date.
- Coverage. Such stocks have 5 or more analysts contributing to the consensus target price according to Thomson Reuters I/B/E/S.
- Market Capitalization. Such stocks rank in the top 90% of all stocks in the Russell 1000® Index measured by market capitalization.
- Average Daily Volume. Such stocks rank in the top 90% of all stocks in the Russell 1000® Index measured by 30 (calendar) days average daily volume (in USD). The 30 (calendar) days average daily volume is calculated using the previous 30 calendar days up to (and including ) the relevant determination date, based on the primary exchange price and volume across the all U.S. exchanges.
- Corporate Actions. Since the immediately preceding rebalancing date, such stocks have not (i) announced delisting or bankruptcy according to Bloomberg or Reuters or (ii) been delisted or undergone bankruptcy.
The Index is calculated on a total return basis, with all distributions reinvested.
Realized volatility is an historical calculation of the degree of movement based on prices or values of an asset observed periodically in the market over a specific period. The realized volatility of an asset is characterized by the frequency of the observations of the asset price used in the calculation and the period over which observations are made. The Methodology utilizes six-month realized volatility, which is calculated by the Thomson Reuters (Markets) LLC (the “Calculation Agent”) from daily closing asset prices of the stocks in each sector over a six-month period and then annualized.
The Adviser, using a replication strategy, generally invests in all of the securities comprising the Index in proportion to their weightings in the Index. However, under various circumstances, it may not be possible or practicable to purchase all of the securities in those weightings. In those circumstances, the Fund may purchase a sample of the securities in the Index. There may also be instances in which the Adviser may choose to overweight another security in the Index, purchase securities not in the Index which the Adviser believes are appropriate to substitute for certain securities in the Index or utilize various combinations of other available investment techniques, in seeking to track the Index. The Fund may sell securities that are represented in the Index in anticipation of their removal from the Index or purchase securities not represented in the Index in anticipation of their addition to the Index.
The Adviser seeks a correlation over time of 0.95 or better between the Fund’s performance, before fees and expenses, and the performance of the Underlying Index. A figure of 1.00 would represent perfect correlation.
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