Huntington Asset Advisors, a unit of Columbus, Ohio-based regional bank Huntington Bancshares, today rolled out an actively managed “green” equity ETF that it says will target ecologically focused companies that have clear success in marketing their products.
The Huntington EcoLogical Strategy ETF (NYSEArca: HECO), is the first of two ETFs the company plans to bring to market, Huntington Asset Advisors said today in a press release. The new ETF , as well as another ETF it has in the works called Huntington US Equity Rotation Strategy (NYSEArca: HUSE), will both come with annual expense ratios of 0.95 percent, the company has said. The new ETF's cost comes with a few waiver, without which the gross expense ratio would come to 1.51 percent, the company said.
“Many green funds emphasize nascent technologies like wind and solar because they are clean, without regard to whether that’s a logical investment,” Randy Bateman, Huntington’s chief investment officer, said in the press release. “Our approach looks at those opportunities, but then applies logic around whether or not that company is producing products that are affordable by broad markets.”
The new ETF joins a number of funds focused on socially minded investment, notably the AdvisorShares Global Echo ETF (NYSEArca: GIVE), an actively managed portfolio launched in May that targets so-called ESG companies that exhibit corporate and social responsibility as well as ethical corporate governance. The AdvisorShares ETF also gives back 40 basis points of its 1.70 annual expense ratio to a global ecological group headed by the grandson of the late French oceanographer Jacques Cousteau.
A Challenging Niche
Broadly speaking, the socially conscious niche in the ETF world has yet to have a fund in its ranks that has truly broken out.
iShares sponsors the two most successful social-values-based ETFs: the $179.88 million iShares MSCI USA ESG Select Social Index Fund (NYSEArca: KLD) and the $164.9 million iShares MSCI KLD 400 Social Index Fund (NYSEArca: DSI). Both iShares ETFs have an annual expense ratio of 0.50 percent.
While San Francisco-based iShares—which also recently put the iShares Human Rights Index Fund into registration—has had success attracting investors to its socially conscious ETFs, DSI and KLD, the record on funds based on do-gooder sentiments and social conscience is mostly disappointing.
Pax World, the Portsmouth, N.H.-based money management firm, has two funds based on social environmental and governance screens, the Pax MSCI EAFE ESG Index ETF (NYSEArca: EAPS) and the Pax MSCI North American ESG Index ETF (NYSEArca: NASI). Together, the two funds had combined assets of $18.3 as of June 18, according to data compiled by IndexUniverse.
Even worse, in 2010, Tulsa, Okla.-based FaithShares closed shop after its five funds linked to particular pockets of the Christian world failed to attract more than about $10.5 million.
Huntington said the companies that make the cut into HECO’s portfolio will demonstrate environmental stewardship and provide products and services that advance green practices and show evidence of sustainability.
With this approach, the ETF may be more correlated to market indices, like the S&P 500, than specific green funds that target clean tech or alternative energy, which may be more limited in scope.
“Companies with these sustainably green characteristics tend to be more seasoned, have profitable business models, and are usually good environmental stewards,” Brian Salerno, the ETF’s fund manager said in the press release.
Salerno joined Huntington in 2005 and has nearly two decades of experience in the investment management industry.
Huntington Bancshares, the parent company of the firm launching the ETF, is a $56 billion regional bank holding company.
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