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Huntington Plans Active ETF With Options

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Huntington Asset Advisors, the investment arm of Columbus, Ohio-based Huntington Bank, made its second ETF-related filing in as many months with the Securities and Exchange Commission, the latest a petition to offer an active equity ETF complete with an options-based strategy designed to protect returns.

In June, the firm filed to gain permission to offer active ETFs, and said separately it was planning on rolling out a sector rotation fund as well as what it called the world’s first actively managed environmentally focused exchange-traded fund.

The new filing outlines an ETF that will invest in large-cap U.S. stocks as well as American depositary receipts of large-cap non-U.S. firms. Huntington noted in the filing that the ETF will write covered calls on each position to help generate the capital necessary to buy puts on the S&P 500 and/or S&P 100 Indexes, respectively. The puts will be used to hedge the ETF’s portfolio to the extent the value of its equity positions decline, according to the filing.

Huntington’s ETF announcement last month was noteworthy because it said it hoped to pilfer assets from its existing Rotating Index mutual fund to seed the launch of a sector rotation ETF that’s in the works called the Huntington Global Rotating Strategy Fund. The two funds will have broadly similar strategies, though the ETF would be cheaper, Randy Bateman, the firm’s president and chief investment officer, told IndexUniverse.com in an interview at the time.

While some closed-end funds have been folded into ETFs, Huntington Asset Advisors appears to be the first company that’s contemplating the collapse of a mutual fund into an ETF. However, Vanguard Group designed its line of exchange-traded funds as a separate share class of its existing mutual funds to ease the introduction of its ETFs.

Exemptive relief filings grant the 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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