TrimTabs Investment Research, which actively manages the $237 million AdvisorShares TrimTabs Float Shrink ETF (TTFS | C-83), has branched out on its own to launch ETFs, starting with the index-based TrimTabs Intl Free-Cash-Flow ETF (FCFI), which rolled out today.
According to the prospectus, the fund's index selects the top 20 percent of companies from its selection pool in terms of free cash flow yield. In other words, it chooses the companies with the highest ratio of post-operating-expenses profit to market capitalization. The fund uses an equal-weight approach, rebalancing on a quarterly basis.
Companies are selected from 10 markets: Australia, Canada, China, France, Germany, Japan, Korea, the Netherlands, Switzerland and the United Kingdom.
FCFI comes with an expense ratio of 0.69 percent.
AlphaClone Changing Name, Planning ETFs
AlphaClone is not exactly a newcomer to the ETF space. The firm is behind the AlphaClone Alternative Alpha ETF (ALFA | C-63). But now, with its latest filing, the firm has set off into new territory with a name change and a line of ETFs planned for the future.
Filing as Coefficient Capital, the firm requested exemptive relief to launch self-indexed funds investing in foreign and domestic equity and fixed-income securities, as well as to launch long/short and 130/30 funds. The initial fund outlined in the filing, the AlphaClone Alternative Alpha Small Cap ETF, will invest in domestic small-cap companies that are widely held by hedge funds and institutional investors.
While the company’s name will change, it will retain the AlphaClone brand name for its products, which will all rely on a similar basic methodology to the one used by ALFA. The approach uses public disclosures by hedge funds and institutional investors to identify high-conviction holdings and develop portfolios based on those securities.
The possibilities there seem pretty vast. Using the AlphaClone database, one could presumably highlight different hedge fund strategies, different managers and different asset classes (such as domestic small-cap). The AlphaClone website also describes three sorting options beyond that: Top Holdings (or largest positions), Best Ideas (or largest new positions) and Popularity (largest number of holders).
CEO Mazin Jadallah describes the approach as similar to a self-driving car: “We offer self-driving investment strategies that seek to give investors the opportunity to outperform traditional market cap weighted benchmarks (not to mention active managers) while still offering some protection against market drawdowns.”
Certainly, the firm has tested the waters with ALFA, which has accumulated nearly $146 million in assets under management since its launch. Not bad for a newcomer firm with a one-off ETF and no exemptive relief of its own.
But there’s been other confirmation of investor interest in such products. Global X rolled out its own hedge-fund-mimicking ETF, the Global X Guru ETF (GURU | B-72), at almost the same time. That fund now has $280 million in assets under management (AUM) and two sister funds. The Global X Guru International ETF (GURI | C-26) and Global X Guru Small Cap ETF (GURX | D-53) have not seen as much success (less than $2 million in AUM apiece), however.
That said, the prospects for any future product launched by Coefficient Capital under the AlphaClone brand could meet with a warmer reception given that the firm is specifically focused on these strategies and has a vast database at its fingertips, as well as examples of its strategies’ real-world performance.