[This article appears in our December 2018 issue of ETF Report.]
During the first 10 months of 2018, we saw a steady stream of newcomers to the space in the form of issuers, brands and sponsors. We’ve listed those new entrants in the following pages, including their number of listed funds, their date of market entry, their assets under management, their website and a brief description.
Affinity is another newcomer brand, which issued its first ETF through Regents Park Funds. The Affinity World Leaders Equity ETF (WLDR) is a rather complex multifactor fund that covers developed markets and incorporates risk management in its methodology. Affinity Investment Advisors is a primarily active shop that focuses on earnings and valuation in its approach.
Headquartered in Kansas City, Missouri, asset manager American Century Investments has moved into the ETF space this year in a very determined way, launching five funds. These funds include active fixed-income and smart-beta equity strategies, with the American Century Diversified Corporate Bond ETF (KORP) and the American Century STOXX U.S. Quality Value ETF (VALQ) both rolling out in January.
Breakwave Advisors is a commodity trading advisor (CTA) that specializes in shipping and freight investments, so it’s no wonder it put its name on the Breakwave Dry Bulk Shipping ETF (BDRY) from issuer ETF Managers Group. BDRY invests in dry bulk freight futures, and Breakwave serves as its CTA. Although the fund has less than $3 million in assets, it qualifies as one of the more interesting launches of 2018.
Cboe Vest Financial is an asset management subsidiary of Cboe Global Markets that specializes in options strategies. Cboe Global Markets is also the parent company of ETF. com. Cboe Vest launched its first ETF, the Cboe Vest S&P 500 Dividend Aristocrats Target Income ETF (KNG), in March; the fund has an options overlay incorporated into its investment approach. Cboe Vest currently has multiple additional ETFs in registration with the SEC.
Defiance ETFs is an issuer that combines disruptive technology exposure with index-based investment approaches in its quest to provide retail investors with investment opportunities previously only available to larger investors. The Defiance Future Tech ETF (AUGR) was the firm’s first fund, launching in early August. It focuses on companies that develop and implement augmented and virtual reality technology. The firm is based in New York City.
Distillate Capital Partners launched its first ETF, the Distillate U.S. Fundamental Stability & Value ETF (DSTL), in late October. The issuer focuses on the value and quality factors, and on exploiting behavioral biases in its strategies. It also incorporates risk control measures into its approach. The issuer is affiliated with the advisory firm of the same name.
Impact Shares is an issuer focused on socially responsible investing, but with a twist. The firm targets specific causes in its ETFs, and partners with nonprofits that are leading supporters of those targeted causes, relying on their guidance to create indexes of companies that support those causes. In July, it launched the first ETF to focus on racial equality, the Impact Shares NAACP Minority Empowerment ETF (NACP).
Innovation Shares as a brand is focused on themes that investors are interested in but can’t easily access. Its indexes incorporate artificial intelligence and natural language processing into their methodologies to ferret out the companies that offer access to their targeted themes. Its first fund, the Innovation Shares NextGen Protocol ETF (KOIN), launched at the end of January and was one of the first ETFs to focus on blockchain technology.
Insight Shares is another label dedicated to socially responsible investing with a cause-based ethos, and its funds are issued by UBS. The firm’s first ETF, the InsightShares LGBT Employment Equality ETF (PRID), launched in January, and targets companies whose employment policies support the LGBT community. Its methodology is based on standards set forth by the Human Rights Campaign.
LeaderShares, partnered with issuer Redwood Asset Management, debuted in early October with the launch of the LeaderShares AlphaFactor U.S. Core Equity ETF (LSAF), a fund with a complex multifactor methodology. The firm espouses a differentiated quantitative systematic approach to investing that seeks to avoid the market distortions caused by investors piling into newly popular smart-beta strategies.
Marblehead, Massachusetts-based Little Harbor Advisors is a quantitative investment boutique that seeks to provide investment solutions for financial professionals and issued its first fund in April. The LHA Market State U.S. Tactical ETF (MSUS) relies on artificial intelligence to invest in a combination of large-cap stocks and futures contracts via a strategy designed to minimize losses. The fund is actively managed.
Metaurus Advisors is an asset manager that seeks to provide financial solutions that aren’t constrained by asset class or geography. It made its ETF industry debut with the launch in February of the U.S. Equity Ex- Dividend Fund-Series 2027 (XDIV) and the U.S. Equity Cumulative Dividends Fund- Series 2027 (IDIV), two funds that track the price return and cash dividends, respectively, of the S&P 500 Index via futures contracts.
The Motley Fool website and organization has long been known as a source of information for retail investors, but this year, Motley Fool Asset Management entered the ETF space with the Motley Fool 100 Index ETF (TMFC), launched via plug-and-play advisor RBB Fund, in late January. Motley Fool leveraged its analysis of U.S. equities to create the index underlying TMFC.
Opus Capital Management is an institutional investment management firm that includes separate account management and subadvisory services among its offerings. It partnered with Aptus Capital Advisors to launch the Opus Small Cap Value Plus ETF (OSCV) in July, with Exchange Traded Concepts serving as the fund’s issuer. OSCV embodies Opus’ embrace of dividend-paying small-size companies that offer growth, quality and attractive valuations.
The Perth Mint entered the U.S. ETF scene as the driving force behind the Perth Mint Physical Gold ETF (AAAU), which launched in July. The fund was the lowest-priced physical gold ETF at the time of its launch, and is additionally noteworthy in that it can be redeemed for physical gold in the form of coins and bars. Exchange Traded Concepts served as the fund’s issuer.
PGIM Investments is an arm of Prudential Financial and represents just the latest affiliate of a large insurance provider to enter the market. USAA and Nationwide similarly launched their own ETF families in 2017. PGIM’s first ETF was the PGIM Ultra Short Bond ETF (PULS), which has accumulated more than $100 million in assets under management in less than a year of trading.
Portfolio+ is a brand that launched this year under the Direxion umbrella. Unlike Direxion’s mostly 2x and 3x geared ETFs, the issuer describes the Portfolio+ family as “lightly leveraged,” in that the funds provide 1.25x exposure to the performance of their underlying indexes. This means they’re far less risky than the firm’s funds that can provide double or triple the performance of their associated indexes, possibly broadening their appeal to investors.
The leveraged and inverse REX Microsectors ETNs that launched this year are backed by the Bank of Montreal. The products are all tied to the same benchmark, the NYSE FANG+ Index, which includes just 10 stocks, five of which are Facebook, Apple, Amazon, Netflix and Google, reflecting the acronym. The rest are large and highly liquid technology, internet and media companies that are similarly well-known.
New York-based Salt Financial issued its first ETF in May, when it rolled out the Salt High truBeta US Market ETF (SLT). The firm offers data, indexes and ETFs, though currently just one of the latter. Its offerings are built around its truBeta method of forecasting beta for the next quarter that incorporates intraday, daily and monthly historical return data via a machine-learning algorithm.
TriLine Index Solutions is the issuer of the NYSE Pickens Oil Response ETF (BOON), which is an equity fund tracking the performance of large-cap U.S. equities that have high correlations to the price of crude oil. BOON bears the name of T. Boone Pickens, a well-known energy investor. Dallas-based TriLine focuses on providing differentiated indexes designed to underlie passive energy investment products.
Vesper launched its first ETF, the Vesper U.S. Large Cap Short-Term Reversal Strategy ETF (UTRN), in September. The fund’s underlying index is based upon an algorithm incorporating Chow’s ratio, both of which were developed by Vesper co-founder Dr. Victor Chow of West Virginia University’s finance department. The metric identifies stocks whose performance may have suffered from an overreaction by investors and are likely to rebound.
Western Asset Management is one of Legg Mason’s best-known independent affiliates, and has built its reputation on its value-driven active management of fixed-income portfolios. Although Legg Mason launched its first ETF in late 2015, it waited almost three years to debut an ETF bearing the Western Asset brand. The Western Asset Total Return ETF (WBND) is a core-plus bond fund designed to outperform the broad bond market while keeping volatility limited.
Whitford Asset Management implements volatility and market sentiment data in its approach. The ETF it launched, the Volshares Large Cap ETF (VSL), tracks an index that seeks to identify companies likely to experience short-term appreciation but with low volatility. It selects its narrow component list of 25 securities from a universe of the 500 largest U.S. stocks based on market capitalization and then equal-weights them.