Investment Vehicle Comparisons

Comparing Active Funds, Passive Funds and Smart Beta

  • Active: Active funds are managed by investment experts who select stocks, bonds, or other investment instrument when creating a fund. The majority of mutual funds are actively managed with the goal of outperforming their benchmark indices. Active managers strive to adjust and exploit inefficiencies, anomalies and irregularities in the markets.
  • Passive: Passive funds track an index. The goal is to match an index’s performance and holdings. Some advantages of passive funds are lower fees, transparency and tax efficiency. Many passive funds typically use market capitalization to weight the companies in a fund.
  • Smart Beta: Smart beta (also known as strategic beta or intelligent beta) seeks to blend the best of both the active and passive worlds.  Smart beta defines a category of investment strategies that track indices and break the link between the market capitalization of an asset and its weight in the portfolio.  The investment strategies employ transparent rules-based approaches that weight the companies in the indices based on specific fundamental metrics rather than on market capitalization.
    The OppenheimerFunds℠ ETFs are examples of smart beta funds with all of our funds weighted by the fundamental metric of top line revenue.

 

Understanding the Differences of Small Cap, Mid Cap, and Large Cap Indices

Market capitalization is a basic way to measure the size of a company and is determined by multiplying each company's shares outstanding by the market price per share.  Market cap is one way to measure investment risk;  larger companies typically have less risk but also less return potential than smaller companies.  Indices are created in each of the market cap sizes, meaning companies within that index fit within the market cap range the index covers; and each index consists of the stocks the index provider feels will best gauge the overall market in that cap range or market sector.

  • Small Cap: An index containing small market capitalization has most of its holdings within a range from approximately $300 million to under $3 billion. Examples of small cap indices are the Dow Jones US Small Cap Total Stock Market Index, Russell 2000, S&P 600 and the Wilshire US Small Cap Index.
  • Mid Cap An index containing mid-sized market capitalization companies has most of its holdings within a range of $3 billion to $15 billion. Mid cap index examples are the S&P 400, Russell Mid Cap and Wilshire US Mid Cap. 
  • Large Cap: An index containing large market capitalization companies has most of its holdings over $15 billion. Examples are the Dow Jones Industrial Average (DJIA), S&P 500, and the NASDAQ 100 index. It is interesting to note all 30 of the stocks in the DJIA are also in the S&P 500. The DJIA also uses its own metric to weight the stocks not market capitalization.

Understanding Small Volume Funds vs. Large Volume Funds

Trading volume has little effect on liquidity of ETFs; an ETFs average daily volume (ADV*) is only a small part of the ETFs' liquidity picture. The size of the fund's trading volume does not constitute its liquidity; the stocks within a fund determine the liquidity of the fund. Individual stocks liquidity are based on their average ADV. Regardless of an ETFs volume, liquidity of an ETF should be evaluated by examining the liquidity of the fund's constituents.

*ADVnumber of shares traded per day, averaged over a defined period of time, typically one year

Holdings data reflects the accounting positions as of the date listed, and may not reflect any trades made on that date.

On December 2, 2015, OppenheimerFunds, Inc. acquired 100% of the stock interests of VTL Associates, LLC, the investment adviser to the Oppenheimer Revenue Weighted ETF Trust, formerly the RevenueShares ETF Trust (the “Trust”). As of that date, OppenheimerFunds Distributor, Inc. became the general distributor and principal underwriter for each series of the Trust.

An investment in the funds is subject to investment risk, including the possible loss of principal amount invested. Fund returns may not match the return of their respective Index, known as non-correlation risk, due to operating expenses incurred by the funds. The alternative weighting approach employed by the each Fund (i.e., using revenues as a weighting measure), while designed to enhance potential returns, may not produce the desired results. Because each fund is rebalanced quarterly, portfolio turnover may exceed 100%. The greater the portfolio turnover, the greater the transaction costs, which could have an adverse effect on Fund performance. The risks associated with each specific fund are detailed in the prospectus and could include factors such as increased volatility risk, small and medium capitalization stock risk, concentration risk, non-diversification risk, financials sector risk, American Depositary Receipt risk, currency exchange risk, foreign market risk, growth style investing risk, portfolio turnover risk, and/or special risks of exchange-traded funds.

The Fund’s per share net asset value or “NAV” is the value of one share of the Fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV of the Fund and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price” or “MP”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the Fund are listed for trading when the fund’s NAV is calculated at market close. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.) Returns less than one year are cumulative.

STANDARD & POOR'S and S&P are registered trademarks of Standard & Poor's Financial Services LLC ("S&P") and have been licensed for use by VTL Associates, LLC, Fund Advisor. No financial product offered by VTL Associates, LLC, Fund Advisor or its affiliates is sponsored, endorsed, sold or promoted by S&P or its affiliates, and S&P and its affiliates make no representation, warranty or condition regarding the advisability of buying, selling or holding units/shares in such products.