The BlackRock U.S. Equity Factor Rotation ETF (DYNF) is approaching its fourth birthday. The active ETF outperformed the S&P 500 over the past one- and three-year periods. Yet, DYNF had just $53 million as of January 24 and traded infrequently over the prior 30 days. However, on January 25, the ETF traded 53 million shares. If this significant activity results in millions of new shares being created, DYNF will soon have more than $2 billion in assets.
DYNF actively selects large-cap stocks based on the rotation of the five traditional factors. Those are minimum volatility, momentum, quality, small size, and value. Index-based single or multi-factor ETFs make security-level changes every quarter or six months. However, the managers of DYNF can adjust the positions of the fund daily. As of January 24, the fund’s largest positions were Microsoft and Apple but also Home Depot and United Parcel Services.
In 2023, DYNF’s 36% total return was much stronger than the 26% gain for the iShares S&P 500 ETF (IVV). Year-to-date as of January 24, the active ETF’s 2.9% total return was ahead by 80 basis points.
BlackRock’s Growing Focus on Active ETFs
VettaFi interviewed Dominik Rohe, head of BlackRock’s Americas ETF and Index Investments business in November 2023. Rohe said then “Active ETFs are a growing part of the ETF landscape. They make up 38% of all ETFs in the U.S. and representing $101 billion in AUM. Lines are being blurred between active and index. ETFs are no longer simply the domain of low-cost indexes or transparent rules-based investing. They’re converging to become a technology to generate active return.”
DYNF charges a competitive 0.30% expense ratio that we believe leverages BlackRock’s scale as the largest U.S. and global ETF provider. We think the low fee combined with the performance record and the ability for new shares to be easily created on demand made the January 25 trading possible.