New ETF Brands

February 26, 2016

The year 2015 saw more than 280 ETFs launch on U.S. exchanges and an unprecedented number of new brands enter the ETF space, including first-time issuers as well as firms that launched their funds via another company's exemptive relief. In all, nearly 30 new brand names made their debut last year. Using FactSet's classification system, we've listed those newcomer brands in the following pages along with brief descriptions, their websites, how many funds they've launched, dates of market entry and total assets under management.

AccuShares is notable among the new ETF brands for its patent, which allows it to capture spot prices on assets like commodities and volatility, which are usually accessed via the futures market. The firm's products have a design similar to a teeter-totter, in which cash assets flow between paired funds representing long and short exposures, with distributions and rebalancing occurring monthly.

Ft. Mitchell, Kentucky-based AlphaMark Advisors is a registered investment advisory firm that was founded in 1999 by President and Chief Investment Officer Michael Simon. Its sole listed ETF, the AlphaMark Actively Managed Small Cap ETF (SMCP), targets the global small-cap market and selects stocks that the firm identifies as exhibiting consistent growth, sustainable earnings momentum and the capacity to generate cash flows in any economic environment.

CSOP Asset Management is headquartered in Hong Kong and is the world's largest renminbi qualified foreign institutional investor, with a total quota of more than $7.5 billion. The firm, which is a joint venture owned by China Southern Asset Management Co. Ltd. and OP Financial Investments Limited, was the first subsidiary owned by Chinese asset management companies to be opened outside of China's mainland.

Columbus, Ohio-headquartered Diamond Hill Capital Management is an investment management firm that offers a range of actively managed mutual funds and the index-based Diamond Hill Valuation-Weighted 500 ETF (DHVW), as well as private investment funds and separate accounts. It has total assets under management of $16.8 billion as of Dec. 31, 2015. The firm's investment philosophy revolves around the idea that an individual company's intrinsic value is independent of its stock price.

Based in Wheaton, Illinois, Elkhorn Investments was founded by former Invesco PowerShares Managing Director Ben Fulton. The firm has focused on "smart beta" funds in its first two launches, with more ETFs planned in that vein. Elkhorn also offers market-linked CDs, structured notes and unit investment trusts. It teams up with third-party research firms to develop co-branded investment products, which it brings to market and provides with marketing and distribution support.

ETF Managers Group offers customized services to potential ETF issuers, including exemptive relief and distribution services, and notes that it can help clients launch an ETF in as little as 365 days. Beyond the two funds ETF.com classifies as falling under ETFMG's brand, the company has participated in the launches of ETFs under the PureFunds, Loncar, Etho, Sit, Tierra and YieldShares brand names, and has partnered with a wide range of firms.

Etho Capital is an investment management company that seeks to address the problem of climate change through sustainable investing. The index methodology underlying its only listed ETF, the Etho Climate Leadership U.S. ETF (ETHO), excludes companies in certain sectors and industries like energy, aerospace and tobacco, and scores the remaining U.S. companies based on their degree of climate efficiency, selecting and equal-weighting the top 50%.

Gavekal Capital is a Denver-based investment manager that offers ETFs, a mutual fund, subadvisory services and managed accounts. Its investment philosophy is designed to exploit what the firm terms the "knowledge effect," which is based on the premise that the stocks of very innovative companies tend to outperform. Gavekal's approach considers each company's "intangible assets," including such elements as the amount spent on R&D, employee training and advertising.

Goldman Sachs Asset Management is not exactly new to the exchange-traded product space, as its brand has appeared previously on exchange-traded notes, but it launched its first in-house ETFs in 2015. The ActiveBeta funds use a multifactor index-based approach that targets the value, momentum, quality and low-volatility factors. Also of note, the issuer has sought to be competitive on price, charging only 9 basis points for its large-cap U.S. ETF, the Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF (GSLC).

Hull Tactical Asset Allocation launched its actively managed Hull Tactical U.S. ETF (HTUS | F) through issuer Exchange Traded Concepts. HTUS relies on Hull's proprietary, quantitative model to achieve its goal of long-term capital appreciation. The fund can take long and short positions in S&P 500 ETFs as well as investing in inverse and leveraged S&P 500 ETFs and the U.S. Treasurys market. The Chicago-based firm was founded by Blair Hull in 2013.

Innovator Management is partially owned by CliftonLarsonAllen Wealth Advisors, and its ETF is issued by Academy Funds. The actively managed Innovator IBD 50 (FFTY | C-30) is the firm's only ETF so far. FFTY's strategy is to reweight the components of the price-weighted IBD 50 Index, a growth-focused domestic index calculated by Investor's Business Daily, according to a proprietary method that relies on fundamental and technical indicators.

Financial services giant John Hancock Investments is just one of the traditionally active mutual fund shops that have entered the ETF arena recently. The firm not only partnered with Dimensional Fund Advisors, which designed the underlying indexes for and serves as advisor to its ETFs, but it launched the first multifactor sector ETFs. The funds' multifactor methodology targets size, value and profitability factors.

Lattice Strategies' four index-based ETFs are constructed under the principles of the firm's "risk-first" approach, which is based on the idea that the allocation of risks is the primary driver of long-term capital growth. In addition to its own indexes and ETFs, Lattice also offers multiasset solutions. As of the end of 2015, $1.5 billion in institutional and retail assets was tied to Lattice's investment strategies. The firm was founded in 2007.

Legg Mason was one of the large, traditionally active mutual fund shops that dove into ETFs last year, rolling out its family of four index-based smart-beta funds right before the end of 2015. The ETFs track indexes developed by Legg Mason subsidiary QS Investors. Founded in 1899, Baltimore-headquartered Legg Mason has a total of $651.5 billion in assets under management and ranks as the 21st-largest asset manager in the world.

Lenexa, Kansas-based Loncar Investments was founded by Brad Loncar, the firm's principal owner and a full-time investor who manages a family fund with a heavy focus on biotech stocks. The brand's sole ETF, the Loncar Cancer Immunotherapy ETF (CNCR), tracks an equal-weighted index of roughly 30 companies that are producing or are in clinical trials for cancer immunotherapy drugs. CNCR is the first fund to focus on this very specific slice of the health care sector.

Master Shares currently has just one ETF trading, the Master Income ETF (HIPS), which tracks the TFMS HIPS 300 Index. The fund only invests in "pass through" securities such as mortgage and equity real estate investment trusts, business development companies, closed-end funds and master limited partnerships. Pass-through securities are labeled as such because they pass most of their income on to their shareholders.

MomentumShares and its sister brand ValueShares are both issued by investment firm Alpha Architect. Founded by Wesley Gray, Ph.D., the firm is an active manager that bases its strategies on behavioral finance. The two listed MomentumShares cover the U.S. and non-U.S. companies and use a systematic investment process to build a portfolio of approximately 50 stocks with the "highest quality momentum."

O'Shares Funds is a division of O'Leary Investments. Founder Kevin O'Leary is perhaps best known to U.S. audiences as one of the stars of the NBC show "Shark Tank." The five ETFs launched under the O'Shares name all track FTSE indexes that target the high-quality, low-volatility and high-dividend yield factors. The family includes funds covering the U.S., Asia-Pacific and Europe, as well as funds offering currency-hedged exposure to the latter two regions.

Pacer Financial was founded in 2004 and launched its first ETF in 2015. The firm's lineup is dominated by its Trendpilot ETFs, which use moving averages to adjust their allocations between Treasurys and a targeted asset class. However, Pacer's involvement in the ETF industry stretches back over several years, as it has partnered with other firms to market their ETFs and ETF-related strategies via its wholesaling operations.

Principal Financial Group is a global investment manager with $527.4 billion in assets under management as of the end of 2015. The Principal EDGE Active Income ETF (YLD), currently the only listed Principal-branded ETF, is an actively managed fund subadvised by Principal-owned investment boutique EDGE Asset Management. YLD provides current income through exposure to global equities, debt, MBS/ABS, preferred stock, MLPs and REITs.

Reaves Asset Management is an investment manager focused on the utilities, energy and telecommunications sectors. It has more than $2 billion in assets under management and serves both institutional and retail clients. The Reaves Utilities ETF (UTES) is currently the only ETF trading under the brand; UTES is an actively managed fund that invests in U.S.-listed utilities companies based on their fundamental, growth and risk metrics.

Sit Fixed Income Advisors II is a registered commodity trading advisor and a subsidiary of investment manager Sit Investment Associates. The Sit Rising Rate ETF (RISE) is an actively managed ETF that aims to capitalize on rising interest rates by taking short positions in futures contracts on two-, five- and 10-year Treasurys. RISE is Sit's first ETF, but the firm has previously delivered the strategy to investors in other wrappers.

Tierra Funds is an ETF sponsor with a focus on what it describes as the "increasingly integrated Americas capital markets." Its first fund, the Tierra XP Latin America Real Estate ETF (LARE), targets companies that generate their revenues primarily from real-estate-related operations. LARE's underlying index weights companies based on their market cap, average dividend yield and liquidity. It is the first ETF to cover the Latin America real estate space.

Tortoise Capital Advisors is an investment manager focused on energy investing. The firm's Index Solutions arm launched its only ETF so far halfway through last year. The Tortoise North American Pipeline ETF (TPYP) is structured as a regular ETF, and targets MLPs and MLP-related companies. Because of its structure, MLPs are not allowed to represent more than 25% of the total portfolio, and the index sets the cap even lower, at 20%.

New York City-based TrimTabs is not exactly new to the ETF space. AdvisorShares launched its own actively managed fund using the firm's strategy back in 2011. However, 2015 saw the launch of the index-based TrimTabs International Free Cash Flow ETF (FCFI) under the TrimTabs brand. FCFI's underlying index covers companies with high free cash flows from 10 different non-U.S. countries, and implements a two-tiered equal-weighting scheme.

Tuttle Tactical Management sponsors two actively managed ETFs that it launched using Virtus' exemptive relief. Both funds make allocation decisions based on market currents and crosscurrents, and implement multiple strategies to achieve their goals. Tuttle mainly operates as an ETF strategist, providing tactical ETF strategies to other investment professionals and their clients; the firm is best known for its use of trend aggregation strategies.

U.S. Global Investors is an investment management firm specializing in global markets and niche sectors. The firm started as an investment club and eventually became a registered investment advisor in 1968. U.S. Global's first ETF, the U.S. Global Jets ETF (JETS), covers companies worldwide that operate airlines or that are involved in an industry connected to airlines, such as operating airports, manufacturing aircraft and providing terminal services.

Virtus ETF Solutions, formerly known as ETF Issuer Solutions, is a subsidiary of Virtus Investment Partners. Although it operates as a multimanager ETF platform and is the issuer behind several ETFs, it only has one ETF carrying its brand name right now, the actively managed Virtus Newfleet Multi-Sector Unconstrained Bond ETF (NFLT | F). The fund is a "go anywhere" fixed-income ETF that is managed by Newfleet Asset Management.

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