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Momentum Is Having A Killer Year But Not If You Ask Fama-French

Posted on: 11.08.2017

I was checking out my portfolio returns this year and the returns of various Smart Beta / Factor ETFS and one really jumped out at me.  It was the iShares Edge MSCI USA Momentum Fctr ETF (MTUM), a momentum fund as the name implies.  It’s one of the largest Smart Beta ETFs available with over $3.5 Bil under management… the expense ratio is also low at 15 basis points (0.15%).  Year to date, its total return is up over 23% compared with its ‘beta benchmark’ the S&P 500 which is up close to 12% this year.

Naturally, the next thing I was interested in was other momentum ETFs.  Were they all doing this well?  As a big fan of Alpha Architect, I defaulted to look up MomentumShares US Quantitative Momentum ETF (QMOM).

Graph showing year to date returns of smart beta ETFS for momentum.

Whatever factor MTUM was catching was clearly different than QMOM.  QMOIM was hardly up 5% year to date.  So what gives?

In a short version, MTUM doesn’t use the classic momentum measure by Fama-French (2-12 month).  The fund also limits its universe to large – mega cap stocks.   I ‘ll Wes Gray from Alpha Architect explain the rest….

Trick Question: How is the Momentum Factor Performing YTD? –

(Last Updated On: July 24, 2017) If you ask your typical long-only investor (or financial advisor) how momentum is doing this year they’ll likely say, “Amazing!” This statement will almost surely be based on the fact they own (or know about) the iShares “Momentum Factor” Fund (Ticker: MTUM).

Corey Philip

Corey Philip is the founder of RealSmartBeta.com. His focus is on expanding investor knowledge of Smart Beta ETFs and quantitative investing. Learn more about Corey in the 'ABOUT' section of this website.

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