Goldman Sachs ActiveBeta International Equity ETF is a multifactor fund that winds up leaning toward stable high-quality companies, while its other targeted risk factors prevent it from venturing too far into the large-cap growth segment of the market. That balance should help it carve out a modest risk-adjusted advantage over the MSCI ACWI Ex USA Index, meriting a Morningstar Medalist Rating of Silver.
This fund tracks the Goldman Sachs ActiveBeta International Equity Index. The portfolio is constructed from four equally weighted risk factor sleeves with each one targeting a specific factor, including value, momentum, quality/profitability, and low volatility. Value, momentum, and profitability have historically outperformed the market and should continue to do so over the long run, while the low volatility sleeve should offer better risk-adjusted performance than the MSCI ACWI Ex-USA Index.
The major benefit of this approach is that it extends diversification across different risk factors while maintaining diversification across stocks, sectors, and countries. Each of the fund's four sleeves will move through cycles, either outperforming or underperforming a broad market-cap-weighted index, sometimes for years at a time. In theory, diversifying across multiple factors should allow the fund to capture their long-term outperformance while reducing the bumpiness of individual factor performance.
The combination of these risk factors doesn't come through in the final portfolio. The fund has consistently favored high-quality companies, while its exposure to the value, momentum, and low volatility risk factors has been inconsistent at best. But these three factors can still exert some influence and help cultivate a more balanced tilt toward quality. Incorporating them into the mix prevents the fund from overweighting larger companies trading at higher multiples—a bias that is common in portfolios that exclusively focus on high-quality companies.
Overall, it managed to slightly edge out the MSCI World Ex USA Index—a proxy for its parent universe—by 12 basis points per year from its launch in November 2015 through April 2023. Its advantage over the category index, the MSCI ACWI Ex USA Index, was 62 basis points per year over the same period, with the additional total return largely coming from its omission of emerging markets stocks.

Analyst Rating

This multifactor strategy leans toward high-quality stocks.

Senior Analyst

Daniel Sotiroff

ASML Hld

National Energy Services Reunited

Moelis

Novan

Shell PLC

AstraZeneca

Rogers

TotalEnergies SE

SAP SE

Osisko Gold Royalties

This portfolio earns an Above Average Process Pillar rating for delivering balanced and consistent exposure to high-quality stocks.

Above Average

Process

The fund's managers are capable but lack the depth and supporting infrastructure of other asset managers. The team earns an Average People Pillar rating.
Raj Garigipati is Goldman Sach's head of ETF Portfolio management and the lone named manager on this ETF. He has managed this fund since it was launched on Sept. 25, 2015. Prior to that he was the chief risk officer of Goldman Sachs' quantitative investment strategies team.
Personnel turnover was high for this small team in 2022. Jamie McGregor left for another position at Goldman Sachs. His replacement, Matthew Maillet, helped manage this ETF for a few months before departing for Morgan Stanley.
The team has expanded its footprint over the past few years. It has dedicated personnel in Hong Kong that can manage the portfolio when many Asian markets are open. But it is still a relatively small team, so personnel turnover is more likely to impact operations when it occurs. Goldman Sachs' global trading desks help these managers execute cost-effective trades in multiple markets.

Average

People

Goldman Sachs Asset Management heads into an uncertain direction on multiple fronts, underpinning its Average Parent rating.
GSAM has long struggled with personnel turnover, with a steady degree of analyst departures and additions coinciding with leadership reshufflings over the past few years that includes the September 2022 departure of equity head Katie Koch. Meanwhile, parent company Goldman Sachs elected to merge its asset management and wealth management units in October 2022, reversing a decision to split them in 2020, and assigned Marc Nachmann to lead the unit. Although he is a longtime Goldman veteran, most of his prior experience has been with the firm’s investment bank. Potentially complicating his remit is the firm’s December 2021 acquisition of NN IP, whose traditional and sustainable-investing branches could add capabilities but will take time to integrate. Bolstering the firm’s sustainability credentials could be especially pressing given the SEC’s November 2022 fining of GSAM for past failings in its ESG-related operations. 
GSAM has some strengths worth highlighting. Portfolio-manager ownership statistics across the firm’s U.S. lineup have improved dramatically since the firm instituted a deferred compensation program of fund shares in early 2020, and GSAM has compelling capabilities within its quantitative equity franchise.

Parent

Goldman Sachs ActiveBeta International Equity ETF

GSIE tracks an index of stocks in developed markets outside of the US comprising four sub-indices: value, momentum, quality and low volatility. The index uses multiple factors to pick stocks, and each sub-index receives equal weight.

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