ETF Watch: New Restaurant ETF Launching

November 08, 2016

Today USCF ETFs is debuting the market’s second ETF to focus exclusively on publicly traded companies that operate restaurants. The USCF Restaurant Leaders Fund (MENU) will compete directly with ETF Managers Group’s Restaurant ETF (BITE), which has about $2.5 million in assets under management.

MENU comes with an expense ratio of 0.65%, versus the 0.75% charged by BITE.

The new ETF trades on the NYSE Arca and tracks the Restaurant Leaders INDXX Index, which covers between 30 and 40 firms. According to the prospectus, the index takes a smart-beta approach to the restaurant space, implementing two quantitative and two dynamic screens to target companies that outperform their peers. Companies must also have at least $300 million in market capitalization and an average daily trading volume of at least $1.5 million.

The index's components can be eliminated from the list if they are among the firms in the index with lowest expected future performance. The methodology relies on a formula that uses 50- and 200-day moving averages to make that determination.

Companies in the index are also classified as “quick service” or “full service,” with the former group weighted at 70% of the index and the latter at 30% upon each quarterly rebalancing, the prospectus said, although those weightings can be approximate. The holdings within each bucket are equally weighted. In contrast, BITE’s holdings are equal-weighted across the board. And while BITE has a U.S. focus, MENU covers both domestic and international equities.

MENU’s top holdings as of Oct. 31 were Starbucks (4.4%), Restaurant Brands (4.34%), McDonalds (4.31%), YUM Brands (4.19%) and Arco Dorados Holdings (3.93%). Meanwhile, BITE’s top holdings were Del Taco Restaurants (3.65%), Arco Dorados Holdings (3.53%), Dominos Pizza (3.44%), Papa Johns International (2.95%) and Dunkin Brands (2.83%).

Contact Heather Bell at [email protected].

 

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