Illinois-Based Millington Wants To Offer ETFs

April 07, 2011

A little-known Illinois firm seeks to join the world of ETFs, with plans for a frontier-ish equity fund.

An Illinois-based financial services firm, Millington Securities Inc., filed with the Securities and Exchange Commission to gain the right to offer exchange-traded funds, saying its first ETF will be an international equity fund focused on a collage of countries, mostly in emerging or frontier markets.

Millington tentatively called its first planned fund the Millington MAVINS ETF. “MAVINS” is an acronym that indentifies individual countries will be represented in the fun —Mexico, Australia, Vietnam, Indonesia, Nigeria and South Africa, according to the exemptive relief filing.

The paperwork, dated April 6, also touched on the possibility of the firm one day bringing other funds to market, including some targeting equities, as well as fixed income and even fund-of-funds ETFs. The filing made clear that its various plans include both U.S. as well as international markets.

The arrival of a relatively unknown firm to the competitive world of ETFs recalls the unexpected arrival last year of Brattleboro, Vt.-based Teucrium, a firm specializing in single-commodity, futures-based ETFs. Millington, like Teucrium, appears to be going after a pocket of the investment universe that isn’t yet well-traveled, specifically the frontier markets.

Teucrium has gathered $86 million, about $78 million of that in its initial ETF, the Teucrium Corn Fund (NYSEArca: CORN) that it rolled out in June 2010.

New Ideas Welcome

While Teucrium has yet to turn the corner in terms of demonstrating that its long-term viability, its ability to gather some assets suggests that fresh ideas are still welcome in an ETF industry that has become famous for serving up diverse investment strategies.

On one end of the spectrum are core funds like the SPDR S&P 500 ETF (NYSEArca: SPY), and on the other are funds that are questionably narrow in their focus, such as the First Trust Nasdaq CEA Smartphone Index Fund (NasdaqGM: FONE).

Assets in the U.S. ETF industry are fast approaching $1.1 trillion. SPY, the first U.S. ETF, was launched in January 1993 and now has just over $90 billion in assets.

To drive home the point, frontier markets are indeed the next frontier in the world of ETFs and investments in general. No one provider has yet served up a go-to strategy the way the Vanguard MSCI Emerging Markets ETF (NYSEArca: VWO) or the iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM) have become for investors seeking broad developing-markets exposure.

Naperville, Ill.-based Millington didn’t say what the annual expense ratio on its MAVINS ETF might be.

The exemptive relief filing said the MAVINS ETF would invest at least 80 percent of its total assets in American depositary receipts and global depositary receipts that comprise the index and have economic characteristics that are identical to those of the securities that are in the index.

Millington also said it’s likely to employ replication or sampling strategies in its ETFs, meaning it won’t own all of the underlying securities in a given index. It didn’t name the index provider for its first fund or any others.

Exemptive relief filings grant ETF firms exception to sections of the Investment Act of 1940 and are just the first step in the path to launching ETFs. It often takes at least six to 12 months from the date of the initial filing for a company’s first ETF to hit the market.



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