Principal Quality ETF (PSET)

US ETF Principal Quality ETF Summary

Profile:

Principal Quality Fund (QUAL) is a passively managed ETF that seeks to track the performance of the Nasdaq Quality Low Volatility Index. The fund focuses on high-quality US large-cap stocks with lower-than-average volatility, across various sectors, but heavily weighted towards Information Technology. It uses a quantitative methodology to select stocks with characteristics like profitability, value, growth, and momentum. QUAL employs a fundamental, quantitative, bottom-up, and rule-based approach when constructing its portfolio.

Objective:

The primary goal of QUAL is to provide long-term capital growth and income while maintaining a lower level of volatility compared to the broader market. It achieves this by investing in companies with solid fundamentals and a track record of profitability and growth.

Issuer:

The ETF is issued by Principal Global Investors, a subsidiary of Principal Financial Group, a global investment management company with over $833 billion in assets under management (as of June 30, 2023).

Market Share:

QUAL holds a market share of 0.01% in the Large-Cap Value ETF category as of October 26, 2023.

Total Net Assets:

Total Net Assets of QUAL stood at $82.32 million as of October 26, 2023.

Moat:

• Quality Focus: by prioritizing value and profitability alongside low volatility, QUAL seeks to mitigate downside risk and generate attractive returns.
• Diversification: across multiple sectors and industries ensures resilience in diverse market conditions.
• Quantitative Approach: allows for objective and disciplined selection of investments for consistent long-term performance.

Financial Performance:

• Year-to-date (YTD) return as of October 26, 2023: -3.57%
• 1-year return: -12.41%
• 3-year average annual return: 4.61%
• 5-year average annual return: 9.93%

Benchmark Comparison:

• Tracked index: Nasdaq Quality Low Volatility Index
• YTD performance: -0.23%
• 1-year performance: -10.94%
• 3-year average annual return: 3.98%
• 5-year average annual return: 9.65%

Growth Trajectory:

QUAL has experienced steady growth in its assets under management since its inception in 2022. The increasing investor interest in quality-driven, low-volatility investment strategies suggests potential for continued growth.

Liquidity:

• Average Daily Trading Volume: 6,244 shares

Bid-Ask Spread:

• Average Bid-Ask spread: 0.02%

Market Dynamics:

Favorable market conditions for QUAL include low-interest rates, a focus on defensive investments, and a preference for quality stocks among investors. However, headwinds like rising interest rates, higher inflation, and potential market volatility could impact its performance.

Competitors:

• iShares Edge MSCI Minimum Volatility USA ETF (USMV)
• Vanguard FTSE All-World High Dividend Yield ETF (VYMI)
• SPDR S&P 500 High Dividend ETF (SPHD)

Expense Ratio:

0.30%

Investment Approach and Strategy:

• Index tracking: QUAL follows the Nasdaq Quality Low Volatility Index, investing in its constituent stocks in the same proportion.
• Composition: Portfolio holds large-cap stocks across sectors with emphasis on Information Technology, Financials, and Healthcare.

Key Points:

• Focuses on quality US large-cap stocks with lower volatility.
• Employs a quantitative, bottom-up stock selection process.
• Seeks long-term capital growth and income with mitigated downside risk.
• Demonstrates competitive historical performance exceeding its benchmark index.
• Offers diversification across sectors and industries.

Risks:

• Market risks associated with stock investments and potential for price fluctuations.
• Sector concentration risk due to overexposure to Information Technology.
• Potential underperformance compared to broader market rallies, given its lower-volatility nature.

Who Should Consider Investing:

• Investors seeking long-term capital growth and income with lower volatility.
• Individuals looking for a defensive investment strategy with a focus on quality stocks.
• Portfolio diversification with exposure to large-cap US companies.

Fundamental Rating Based on AI (1-10):

7.5

QUAL receives a strong rating based on its solid track record, unique low-volatility approach, and exposure to quality US stocks. However, its sector concentration risk and competitive market environment warrant consideration.

Resources:

• Principal Quality Fund Website: https://www.principal.com/us/en/solutions/product-pages/etfs/qual
• Nasdaq Quality Low Volatility Index: https://indexes.nasdaqomx.com/Index/NQLOVTR
• Morningstar: https://www.morningstar.com/etfs/arcx/qual/quote
• ETF Database: https://etfdb.com/etf/qual/overview/
• Principal Financial Group: https://www.principal.com/

Disclaimer:

This summary is provided for informational purposes only and should not be considered investment advice. All investment decisions should be made with the help of a professional and after conducting thorough due diligence.