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Twin Revenue-Weighted ETF Launches by OppenheimerFunds

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The primary focus of income investors is generating consistent cash flow from their liquid investments. OppenheimerFunds Investments has introduced two new international dividend options to its existing line of revenue-weighted ETF strategies, namely Oppenheimer Emerging Markets Ultra Dividend Revenue ETF REDV and Oppenheimer International Ultra Dividend Revenue ETF RIDV on Aug 7, 2018 (see: all Broad Developed World ETFs here).
 
OppenheimerFunds is an asset manager whose 16 investment management teams oversee actively managed equity, fixed income, alternative, and multi-asset portfolios, as well as factor and revenue-weighted ETF strategies.
 
Inside REDV
 
This fund tracks the FTSE Custom Emerging Ultra Dividend Revenue Index. The strategy is aimed at investing in securities which exhibit the highest trailing dividend yield and then weight them by revenues, rather than market capitalization. The fund has 101 holdings in the basket with top three weights given to Inventec Corp. (5.3%), Coal India Ltd (3.8%) and CEZ CEZ (2.8%). China and Russia are the double-digit weight holders as per countries targeted with allocation of 22.8% and 14.5%, respectively.
 
Since its inception, the fund has amassed $2.4 million and comes with an expense ratio of 0.46%.
 
Inside RIDV
 
This fund tracks the FTSE Custom Developed ex US Ultra Dividend Revenue Index. The focus is on generating attractive yield amidst low interest rate environment. There are a total of 200 holdings in the pool of fund, with the top three weights occupied by Royal Dutch Shell PLC (4.70%), Total SA (TOT - Free Report) (3.7%) and Assicurazioni Generali SpA (2.5%). United Kingdom (20.2%), France (16.9%) and Germany (14.8%) are the double-digit weighted countries in the fund.
 
The fund has amassed $2.4 million since inception and the expense ratio is 0.42%.
 
How do they fit in the portfolio?
 
REDV and RIDV invest in securities with lower valuation than the traditionally dividend-oriented funds. Revenue-weighted products provide a diversified exposure to the market. It is comparatively less manipulated as compared to the lower line items like net income. A more stable sector exposure could be expected because the top line really tends to not fluctuate much when compared to stock price. Revenue weighing provides a more value-oriented portfolio and has historically outperformed the value-driven market as well as exhibited less drawdowns in growth-driven markets.
 
“When it comes to dividend investing, particularly in the current environment, it may not make sense for investors to limit themselves to the U.S. market, despite its size. Furthermore, investors that focus exclusively on the yield factor style as a core holding may find themselves with a concentration of overvalued stocks. With our expanded offering of the Ultra Dividend Revenue suite, investors are now able to create a high-dividend, value-oriented global portfolio to meet their income needs,” OppenheimerFunds’ David Mazza, Christopher Clark and Sam O’Connell said in a research note. 
 
Given the disruptive state of global trade with emerging market currencies faltering, the newly introduced funds could significant returns (read: Most-Hurt EM ETFs on Turkey Upheaval).
 
The Eurozone grew 0.4% sequentially in Q1, following a 0.7% advancement in Q4 of 2017. Canada’s GDP grew 0.3% in the first quarter, after an uptick of 0.4% in each of the last two quarters. It was the most sluggish expansion since the second quarter of 2016. Meanwhile, the Japanese economy saw its first contraction in Q1 since the December quarter of 2015.
 
After reaching 3.1%in both 2017 and 2018, global growth is expected to decelerate over the next two years as the global slack dissipates, major central banks remove policy accommodation, and recovery in commodity exporters matures. Amid moderating international trade and tightening global financing conditions, growth in emerging market and developing economies is projected to plateau, reaching 4.7% in 2019 and 2020, up from 4.5% in 2018 as per the World Bank (read: Top 5 Foreign ETFs of Q2).
 
Competition
 
OppenhiemerFunds is the leader in revenue-weighted strategy. Oppenheimer Emerging Markets Revenue ETF REEM is the direct competitor to REDV and Oppenheimer International Revenue ETF REFA is the direct competitor to RIDV. The AUM of REEM and REFA is $12.4 million and $12.9 million, respectively. The expense ratio is the same for rivals. Both new products have the potential to garner enough investor interest though they could struggle on volume figures like their counterparts. RIDV has an average trading volume of 68 shares in comparison to REEM, which has 715 shares and RIDV has an average trading volume of 137 shares in comparison to its counterpart REFA, which has 838 shares. 
 
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