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Pure Style ETF Investing



Pure Growth...Pure Value...

Not all style indices are created equal. Guggenheim’s Pure Style suite of ETFs eliminates overlap and offers access to true growth and value opportunities in the marketplace—which may deliver outperformance over the water-downed traditional style benchmarks.

Benefits of Pure Style ETFs

  • Precise Style Exposure.
    By eliminating ambiguous or blend style stocks, a pure style approach delivers exposure to only those stocks with the strongest value and growth style attributes.
  • Outperformance Potential.
    Pure Style ETFs are positioned to provide targeted style exposure, giving them the potential to outperform when a particular style is in favor. Alternatively, when a particular style is out of favor, Pure Style ETFs linked to that style may under perform.
  • Potential Tax-Efficient Exposure.
    Due to the tax-efficient nature of the ETF structure (creation/redemption process), Guggenheim pure style ETFs historically have not paid long-term capital gains. There is no guarantee that this will be the case in the future. Tax-efficient exposure is not an explicit objective of the funds.

Uses of Pure Style ETFs

  • Focused Style Approach.
    Allows you to take a more focused approach to growth and value style investing by eliminating stocks with overlapping factors.
  • Adding a Style Tilt.
    May be used to overweight value or growth as an enhancement to an existing broad market S&P 500® ETF investment.
  • Exposure to Growth and Value without Overlap.
    May be used in tandem to capture the potential benefits of both growth and value stocks simultaneously without “muddying the waters” between the two styles or owning overlapping stocks.

What Is Style Investing?

Style investing is an investment approach in which stocks are categorized according to different style attributes, typically growth and value. Many style-based approaches further segment stocks according to market capitalization (large-, mid-, or small-cap). Style investing is based on the belief that certain identifiable categories of stocks do well over time but do not necessarily do well at the same time. For example, growth stocks beat value stocks during some periods, with the converse also being true. Whether rooted in fundamental market views or on technical analysis, tactical allocation among the various styles and sizes is emphasized as the key to achieving successful performance. It can be an effective way for investors to express their long- and short-term market views.

What Is a Traditional Style Approach?

Traditionally, most style indices are constructed using all the stocks in the corresponding parent index universe, identifying them as either growth or value using multiple factors and weighting them by market cap into the respective index. However, this method results in a group of stocks that has no definitive style characteristic. These stocks are regularly included in both style indices, resulting in “style overlap” between the growth and value indices, which may keep the stocks from fully participating in style performance.

For example, the S&P 500® Growth Index and S&P 500® Value Index are traditional style indices often used as a benchmark by many actively managed mutual funds and passive ETFs. These indices are comprised of the holdings in the S&P 500®. A third (1/3) of the stocks are identified as growth and a third (1/3) are identified as value and are included in their respective style index. The remaining 34% of the stocks are ambiguous in style and are shared by both the S&P 500 Growth and the S&P 500 Value indices.

Traditional Style Approach to Investing

Below is an example of how these blend stocks overlap between the two indices.

Blended stocks overlapping between two indices

Source: Bloomberg, data as of 3.31.2016. Subject to change on a daily basis. The securities mentioned are provided for illustrative purposes only and should not be deemed as a recommendation to buy or sell.

How Is Pure Style Different?

For the purists who want more narrowly defined style indices that could deliver truer style performance, S&P introduced a series of Pure Style indices. Employing a more robust definition of style and with improved discriminatory power to differentiate between growth and value, the Pure Style indices include only stocks with pure growth and pure value characteristics. There are no overlapping stocks and, since stocks are weighted in proportion to their relative style attractiveness, the Pure Style indices avoid the size bias caused by market cap weighting.

The S&P 500® Pure Value Index and the S&P 500® Pure Growth Index are the Pure Style indices comprised of the holdings in the S&P 500® Index. They are structured by identifying a third (1/3) of the market capitalization of the parent index as pure growth, and a third (1/3) as pure value. The remaining 34% of stocks–those that are neither purely growth nor purely value–are excluded from the indices and there are no overlapping holdings.

How is Pure Style ETF Investing Different?

For those investors who want to take a position in the value and/or growth segments of the equity market, the pure style approach may be effective in isolating specific style factors. It may provide greater style purity per dollar invested and potentially deliver outperformance over the watered-down traditional style benchmarks.


What Is Guggenheim S&P Pure Style ETFs Index Methodology?

While some traditional style methodologies do not exclude undefined or blend stocks, Guggenheim Pure Style ETFs include only stocks with the strongest style attributes, which weights by style score rather than by market cap. This approach provides exact exposure to value and growth—eliminating undefined or blend stocks from portfolios.

Below is an example of how the benchmark indices for the Guggenheim S&P 500® Pure Style Growth and S&P 500® Pure Style Value indices are constructed. The same process is followed for the S&P 400® and S&P 600® Pure Style indices.

S&P Pure Style Index Methodology

Book Value to Price ratio is the book value per share of a stock divided by its market price. Earnings to Price ratio is the annual earnings per share of a stock divided by its market price. Sales to Price ratio is the trailing 12-month's sales per share of a stock divided by its market price. Three-Year Change in Earnings per Share over Price per Share is the change in earnings per share for the last three years of a stock divided by its market price. Three-Year Sales per Share Growth Rate is the growth of sales per share of a stock over the last three years.

Access Financial Professional Resources

  • Uncovering Purity of Style: A Look at Pure Style Investing.
  • Growth vs. Value? With Pure Style, You Can Choose Both.
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For more complete information regarding Guggenheim ETFs call 888.949.3837 or click here for a prospectus and a summary prospectus (if available). Investors should carefully consider the investment objectives, risks, charges and expenses of a fund before investing. The fund’s prospectus and its summary prospectus (if available) contain this and other information about the fund. Please read the prospectus and summary prospectus (if available) carefully before you invest or send money.

Pure style ETFs may not be suitable for all investors. The ETFs are subject to the risk that large, medium and small-capitalization stocks may under-perform other segments of the equity market or the equity market as a whole • Value stocks are subject to the risk that the intrinsic value of the stock may never be realized by the market or that the price goes down. Growth stocks typically invest a high portion of their earnings back into their business and may lack the dividend yield that could cushion their decline in a market downturn. Growth stocks may be more volatile than other stocks because they are more sensitive to investor perceptions regarding the growth potential of the issuing company. • The funds are subject to the risk that unanticipated early closings of securities exchanges and other financial markets may result in the funds’ inability to buy or sell securities or other financial instruments on that day. • In certain circumstances, it may be difficult for the funds to purchase and sell particular investments within a reasonable time at a fair price. • Investments in securities, in general, are subject to market risks that may cause their prices to fluctuate over time. An investment in the funds may lose money. • Unlike many investment companies, the funds are not actively “managed.” This means that based on market and economic conditions, the funds’ performance could be lower than other types of funds that may actively shift their portfolio assets to take advantage of market opportunities or to lessen the impact of a market decline. • Tracking error risk refers to the risk that the Advisor may not be able to cause the funds’ performance to match or correlate to that of the funds’ Underlying Index, either on a daily or aggregate basis. Tracking error risk may cause the funds’ performance to be less than you expect. • Shares may trade below their net asset value (“NAV”). The NAV of shares will fluctuate with changes in the market value of the funds’ holdings. In addition, although the funds’ shares are currently listed on NYSE Arca, Inc. (the “Exchange”), there can be no assurance that an active trading market for shares will develop or be maintained. • Each fund is considered nondiversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of fund shares than would occur in a more diversified fund. • Please read the prospectus for more detailed information regarding these and other risks.

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The referenced funds are distributed by Guggenheim Funds Distributors, LLC. Guggenheim Investments represents the investment management businesses of Guggenheim Partners, LLC (“Guggenheim”), which includes Security Investors, LLC (“SI”), the investment advisor to the referenced funds. Guggenheim Funds Distributors, LLC, is affiliated with Guggenheim and SI.

Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objective, risks charges, expenses and the other information, which should be considered carefully before investing. To obtain a prospectus and summary prospectus (if available) click here or call 800.820.0888.

Investing involves risk, including the possible loss of principal.

Guggenheim Investments represents the investment management businesses of Guggenheim Partners, LLC ("Guggenheim"), which includes Security Investors, LLC ("SI"), Guggenheim Funds Investment Advisors, LLC, ("GFIA") and Guggenheim Partners Investment Management ("GPIM") the investment advisers to the referenced funds. Securities offered through Guggenheim Funds Distributors, LLC, an affiliate of Guggenheim, SI, GFIA and GPIM.

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