Principal joins with Nasdaq Dorsey Wright on Dynamic Factor ETF Model

Principal has partnered with smart beta index provider Nasdaq Dorsey Wright to launch the all-ETF factor rotation model portfolio, which is comprised entirely of Principal’s US Equity Factor ETFs

Principal has partnered with Nasdaq Dorsey Wright for the first time to launch the Principal NDW Factor Rotation model portfolio.

The dynamic factor portfolio, which is comprised entirely of Principal’s US Equity factor ETF lineup, aims to identify those factors that will perform well over the coming months. This is the first guided ETF model from NDW that utilizes both momentum and mean reversion, in an attempt to capture short-term continuation signals while simultaneously avoiding performance drag due to holding momentum names too long.

A total of 6 ETFs are considered for selection in the model portfolio, representing a diversified inventory of some of the most powerful style premia available to U.S. investors. This includes Principal’s US Mega Cap Multi-Factor (USMC), Sustainable Momentum (PMOM), Price Setters (PSET), Contrarian Value (PVAL), US Small Cap Multi-Factor (PSC), and Shareholder Yield (PY) ETFs. The model first went live on February 8.

“Factor investing will continue to grow in importance and adoption,” said Paul Kim, head of ETF strategy at Principal Global Investors. “Our suite of factor ETFs benefits from decades of active and factor investing expertise, the rapidly growing body of academic research, and the many advantages of a rules-based implementation in an ETF. We are delighted that Nasdaq Dorsey Wright has developed a relative strength methodology incorporating our factor ETFs to help investors achieve their unique investment goals.”

“Nasdaq Dorsey Wright’s relative strength methodology gives investors valuable tools to navigate the rapidly evolving world of active and passive management,” said Jay Gragnani, Head of Research and Client Engagement with Nasdaq Dorsey Wright. “Our collaboration with Principal allows us to pair a unique relative strength-based strategy with Principal’s line up to create a guided approach to factor investing.”

There is no overlay model fee in addition to the underlying ETF fees, which range from 12 to 38 basis points.* However, financial advisors can only access the model portfolio through subscription to Nasdaq Dorsey Wright’s platform.

As part of the collaboration, Nasdaq Dorsey Wright is responsible for all aspects of portfolio construction and ongoing management, including fund selection and asset allocation decisions. Dorsey Wright selects ETFs for use in the model portfolio based on its proprietary ‘relative strength matrix’ system and a new indicator for measuring momentum sustainability.

Principal has more than $3.2 billion in ETF assets under management globally as of 12/31/2018. As a whole, Principal had $626.8 billion in assets under management at the end of December.

Since 1987, Dorsey Wright has been an advisor to financial professionals on Wall Street and investment managers worldwide. Dorsey Wright offers comprehensive investment research and analysis through their Global Research Platform and provides research, modeling, and indexes which apply Dorsey Wright’s expertise in Point & Figure Relative Strength to various financial products including exchange traded funds and notes, mutual funds, UITs, structured products, and separately managed accounts. In 2015, Dorsey Wright was acquired by Nasdaq, Inc. allowing Dorsey Wright to work towards even greater innovative solutions for its clients. As a single company, Nasdaq is one of the largest providers of Smart Beta indexes with over $74 billion in assets tracking Nasdaq Smart Beta indexes.

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Investment Management

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Teresa Thoensen, 515-878-0800

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* Reflects net expenses. In some cases the investment advisor has contractually agreed to limit the Fund’s expenses by paying, if necessary, expenses normally payable by the Fund. Principal ETFs and the investment adviser may mutually agree to terminate the expense limits. See the applicable prospectus for details.

Carefully consider the Funds’ objectives, risks, charges, and expenses. Contact your financial professional, visit principalfunds.com or call Sales Support at 800-787-1621 for a prospectus, or summary prospectus if available, containing this and other information. Please read it carefully before investing.

Risks

Asset allocation and diversification do not ensure a profit or protect against a loss. Investing involves risk, including possible loss of principal.

Equity investments involve greater risk, including heightened volatility, than fixed-income. Small and mid-cap stocks may have additional risks including greater price volatility. Stocks that previously exhibited high momentum characteristics may not experience positive momentum or may experience more volatility than the market as a whole.

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