Description

XFC follows an index of Canadian stocks from large- to small caps, emphasizing increased exposure to multiple factors, while maintaining the risk profile of the parent index. This method seeks undervalued and over-performing smaller companies from the MSCI Canada IMI Index (parent index) using a composite score derived from the Barra multi-factor equity model. The model uses four factors quality, value, momentum, and small size in its portfolio selection. Value score is calculated from valuation ratios that focus on forward and trailing earnings, cash earnings, book value, and EV/EBIT. Quality score is focused on metrics for profitability, investment quality, leverage and earnings volatility. Momentum score measures sustained relative performance against the global market over a two-year period for the previous 12 months. Low size score compares market cap from companies based in the same country. The underlying index is rebalanced on a semi-annual basis.