AROUND THE WORLD OF ETFs

October 26, 2011

ProShares Unveils Hedge Fund ETF

ProShares, in July, launched an ETF with a hedge fund replication strategy, the latest product to give retail investors access to parts of the market previously only available to so-called accredited investors.

The ProShares Hedge Replication ETF (NYSE Arca: HDG) has an annual expense ratio of 0.95 percent. The fund strives for a high correlation with hedge fund beta by tracking an index based on the Merrill Lynch Factor Model – Exchange Series.

HDG will compete with ETFs like Index IQ’s Hedge Multi-Strategy Tracker ETF (NYSE Arca: QAI), the pioneer in the space. QAI costs 1.13 percent in total operating expenses.

HDG’s underlying index targets a high correlation to the HFRI Fund Weighted Composite Index, an equally weighted benchmark consisting of more than 2,000 hedge funds, the company said on its website.

iShares Rolls Out Emerging Markets Small-Cap ETF

iShares launched a broad emerging markets equities ETF in August focused on small-cap companies. The iShares Emerging Markets Small Cap Index Fund (NYSE Arca: EEMS), costing 0.69 percent, will go head-to-head with the SPDR S&P Emerging Markets Small Cap ETF (NYSE Arca: EWX), which costs 0.65 percent.

While EEMS will track an MSCI benchmark that tracks companies with market capitalization under $3 billion in 21 emerging markets, EWX is linked to an S&P index comprising the under-$2-billion-in-market-cap names.

EEMS allocates nearly 20 percent of its basket to Taiwan names, with South Korea and Hong Kong also at the top. By contrast, EWX allocates 32 percent of its portfolio to Taiwan, with China, South Africa and India rounding off its top country holdings.

New iPath ETN Debuts Dynamic Volatility Play

Barclays Bank added to its iPath roster of volatility-linked ETNs with the launch of its first dynamic volatility strategy, designed as a tool for investors to benefit from volatility spikes while managing the roll cost during calm markets.

The iPath S&P 500 Dynamic VIX ETN (NYSE Arca: XVZ) is designed to give exposure to the S&P 500 Dynamic VIX Futures TR Index, which allocates between the S&P 500 Short-Term Futures Index Excess Return and the S&P 500 VIX Mid-Term Futures Index Excess Return by monitoring the steepness of the implied volatility curve. XVZ comes with a yearly fee of 0.95 percent.

DB Buys Back 3 Elements ETNs

Germany-based Deutsche Bank bought back three Elements ETNs that carry investing legend Benjamin Graham’s name. It didn’t cite a reason, but the three ETNs have gathered few assets.

The three ETNs were:

  • Elements Benjamin Graham Total Market Value Index-Total Return ETN (NYSE Arca: BVT)
  • Elements Benjamin Graham Large Cap Value Index-Total Return ETN (NYSE Arca: BVL)
  • Elements Benjamin Graham Small Cap Value Index-Total Return ETN (NYSE Arca: BSC)

Holders of the ETNs received a cash payment on Aug. 26 equal to the daily repurchase value on Aug. 23, Deutsche said in a press release. The company, which already uses Invesco PowerShares to market a family of ETFs and ETNs it sponsors in the U.S., also began to roll out its very own ETFs under the DBX brand earlier this year.

Van Eck Debuts Mortgage REIT ETF

Van Eck Global launched a mortgage REIT ETF that focuses on companies involved with the purchase or service of commercial and residential mortgage loans.

The Market Vectors Mortgage REIT Income ETF (NYSE Arca: MORT) will track Van Eck’s proprietary Market Vectors Global Mortgage REITs Index, a rules-based, capitalization-weighted benchmark comprising companies that derive at least 50 percent of their revenue from mortgage REITs. Its net expense ratio is 0.40 percent.

The entire 25-stock portfolio is allocated to REITs focused on residential and commercial mortgages, but excludes mortgage finance companies and saving accounts, the company said.

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