ETF Issuer Plans Long/Short Dividend ETF

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April 04, 2013
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It was bound to happen sooner or later, but a dividend-focused fund with a shorting hedge is on its way.

ETF Actively Managed Trust, an entity associated with former executives at FactorShares, filed regulatory paperwork to bring to market an actively managed payout-focused fund that will also have a short-selling overlay to hedge against risks the U.S. and foreign dividend stocks may involve.

The Manna Core Equity Enhanced Dividend Stream Fund will have its primary listing on the New York Stock Exchange’s electronic trading platform Arca, and will trade with the ticker “MANA.” It will come with an annual expense ratio of 0.85 percent, or $85 for each $10,000 invested.

The ETF’s “dividend position” will consist of one or more exchange-traded funds that canvass broad swaths of the market, such as the S&P 500 Index, and may also be put together with constituent securities of such broad benchmarks, according to the prospectus.

The fund will also sell short U.S. and foreign securities to hedge against country or currency risk associated with the dividend position, or because the dividend-focused stocks are likely to underperform the market or lose value in the near term.

“The sub-advisor expects to seek to participate in special dividend situations and engage in dividend capture trading,” according to the prospectus.

A dividend strategy with a short-selling overlay is the latest example of a powerful trend over the past year in the world of exchange-traded funds that has led to more than $60 billion flowing into sundry ETFs serving up access to payout-rich securities. The shorting piece of the strategy appears to address concerns that stocks are much more volatile vehicles to deliver reliable income than are bonds.

ETF Issuer Solutions Inc. is the investment advisor to the fund, and Manna ETFs Management LLC will be the investment subadvisor, according to the filing.

The investment advisor of the fund, ETF Issuer Solutions, is the latest relatively unknown firm to come out of the woodwork to bring to market actively managed funds.

Headed by Matt Brown and Bill Smalley, the new ETF company is hoping to get exemptive relief to offer third-party ETFs in a way similar to Exchange Traded Concepts, as well as proprietary technology solutions linked to fund administration and distribution.

In its initial exemptive relief filing made in November, the firm said it was seeking permission to market active ETFs, and that its first strategy was likely to be called the AltShares U.S. Long/Short Fund.

It said that initial fund would invest primarily in ETFs and other exchange-traded products, but would also tap into global fixed income and equities, currencies, closed-end funds and cash equivalents, according to the filing from the New York-based firm.

 

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