iShares ‘Core’ Four
Thursday’s launches also include iShares’ rollouts of four brand new “Core”-type ETFs that will be part of a 10-fund expansion of the “Core” lineup of cheap ETFs that it introduced in October 2012.
The expansion of iShares’ “Core” brand, effective tomorrow, will also involve the repurposing of six existing funds. Those existing funds will mostly have lower expense ratios than previously, and together those six existing ETFs have about $5.6 billion in assets.
The 10 new Core funds—and, where applicable, their new tickers, new expense ratios and names (amended with the word “Core”)—are as follows:
U.S. Equities
- iShares Core Dividend Growth ETF, a new fund that will begin trading on Thursday, June 12 under the symbol “DGRO” with an annual expense ratio of 12 basis points
- iShares Core MSCI Europe ETF, a new fund that will begin trading on Thursday, June 12 under the symbol “IEUR” with an annual expense ratio of 14 basis points
- iShares Core MSCI Pacific ETF, a new fund that will begin trading on Thursday, June 12 under the symbol “IPAC” with an annual expense ratio of 14 basis points
- iShares Core U.S. Growth ETF (IWZ | A-90), an existing fund that will assume the new trading symbol “IUSG” on Thursday, June 12. Its expense ratio will drop at that time from 25 basis points a year currently to 9 basis points, or $9 for each $10,000 invested
- iShares Core U.S. Value ETF (IWW | A-91), an existing fund that will assume the new trading symbol “IUSV” on Thursday, June 12. Its expense ratio will drop at that time from 26 basis points a year currently to 9 basis points
- iShares Core High Dividend ETF (HDV | A-67), an existing fund that will continue to trade with the symbol “HDV,” but with a lower annual expense ratio of 12 basis points from 40 basis points currently
U.S. Fixed Income
- Shares Core Total USD Bond Market ETF, a new fund that will begin trading on Thursday, June 12 under the symbol “IUSB” and with an annual expense ratio of 15 basis points
- iShares Core U.S. Credit Bond ETF (CFT | B-89), an existing fund that will assume the new trading symbol “CRED” on Thursday, June 12. Its expense ratio will drop at that time from 20 basis points a year currently to 15 basis points
- iShares Core U.S. Treasury Bond ETF (GOVT | A-97), an existing fund that will continue to trade with the symbol “GOVT,” but with the same annual expense ratio of 15 basis points.
- iShares Core GNMA Bond ETF (GNMA | C-84), an existing fund that will continue to trade with the symbol “GNMA,” but with a lower annual expense ratio of 15 basis points from 25 basis points previously
Filing
Launches are not the only items dominating ETF news today.
PowerShares has put into registration an application seeking permission to launch nontransparent active ETFs, and the application seems to be the same as one based on a patent owned by New Jersey-based Precidian Investments.
It’s the fourth firm that has asked for “exemptive relief” using this concept. Those firms include iShares parent BlackRock; SSgA; Precidian itself; and now PowerShares.
None of the petitions has been approved by the Securities and Exchange Commission, but industry scuttlebutt suggests the petitions are indeed moving through the SEC bureaucracy toward approval.
PowerShares said in the filing that the concept involves a blind trust that will allow its funds’ holdings and trading activity to stay in the dark to market participants on a daily basis.
The firm said in the paperwork that the blind trust will allow its proposed funds to use proprietary investment strategies and techniques that would otherwise be exposed to the potential for “free riding” if it operated as an index ETF.
“In a typical index-based ETF, it is necessary for Authorized Participants to know what securities must be delivered in a creation or will be received in a redemption in order for the typical in-kind creation and redemption process to function,” according to the filing.
“For the Trust, however, the Authorized Participant’s knowledge of the securities comprising the portfolio of a fund is not important for purposes of creation and redemption since underlying portfolio securities are not delivered to or received by the Authorized Participant directly.”
Instead, creation units will be created solely by the deposit of cash equal to NAV, and redemptions will be capable of being liquidated for cash at values that are extremely close to NAV. The use of cash for creations, and in-kind redemption through a blind trust, preserves the integrity of the active investment strategy and eliminates any potential for “free riding,” according to the filing.
PowerShares’ proposed initial active ETF will be called the PowerShares Real Estate Securities Portfolio.
