Daily ETF Watch: New Active ETF Rises

January 23, 2014

A longstanding plan to bring to market active, nontransparent ETFs moves forward.

Precidian Investments is one step closer to realizing the launch of its actively managed, nontransparent, mostly long and sometimes short ETFs, which make the case of being able to exploit market opportunities that indexed funds doesn’t afford investors.

At the center of Precidian’s plans is a blind trust working on behalf of the authorized participant that would keep disclosure of portfolio holdings under wraps until regulators require it.

Existing mutual funds must disclose holdings every three months, with a lag, and it appears Precidian’s plan would include disclosure requirements similar to those in place for mutual funds.

Precidian’s latest proposed nontransparent ETF lineup includes:

  • ActiveShares Large-Cap Fund, which will invest in stocks included in the Russell 1000 Index;
  • ActiveShares Mid-Cap Fund, which will invest in stocks that are included in the Russell 2000;
  • ActiveShares Multi-Cap Fund, which will invest primarily in securities included in the Russell 3000 Index and ETFs

Under normal market conditions, its net long equity market exposure will not exceed 100 percent and its net short equity market exposure will not exceed 30 percent. However, the portfolio managers may at times exceed these percentages, according to a prospectus.

The regulatory paperwork didn’t mention tickers or proposed expense ratios.

State Street Global Advisors and iShares also have plans to offer active nontransparent ETFs, using the blind trust mechanism, but the specific strategies aren’t the same.

Launches

A slate of 10 ETFs are going live today, according to NYSE Arca—a blitz of launches that will involve four fund sponsors, including Pimco and Deutsche Bank. The latter is bringing to market a much-anticipated currency-hedged equity strategy focused on South Korea.

The ETF launches include the:

  1. Pimco Diversified Income Exchange-Traded Fund (DI), which will invest in a diversified portfolio of U.S. and non-U.S. public or private bonds of varying maturities from three to eight years. The fund will have an expense ratio of 0.85 percent, or $85 for every $10,000 invested.
  2. Pimco Low-Duration Exchange Traded Fund (LDUR), which will own primarily investment-grade debt with duration of one to three years. It will charge 0.55 percent, or $55 for every $10,000 invested.
  3. Market Vectors MSCI International Quality ETF (QXUS) and
  4. Market Vectors MSCI International Quality Dividend ETF (QDXU), which will both track the MSCI ACWI ex USA Index, according to a filing. The funds both charge 0.45 percent per year, or $45 for every $10,000 invested;
  5. Market Vectors MSCI Emerging Markets Quality ETF (QEM) and
  6. Market Vectors MSCI Emerging Markets Quality Dividend (QDEM) ETF, which will invest in large and midcap stocks across 19 emerging market countries, according to a regulatory filing. Both funds have an expense ratio of 0.50 percent, or $50 for every $10,000 invested
  7. db X-trackers MSCI South Korea Hedged Equity Fund (DBKO), which will have an expense ratio of 0.58 percent, or $58 for each $10,000 invested
  8. db X-trackers MSCI Mexico Hedged Equity Fund (DBMX), which will have an expense ratio of 0.50 percent, or $50 for each $10,000 invested
  9. db X-trackers MSCI All World ex US Hedged Equity Fund (DBAW), which will have an expense ratio of 0.40 percent, or $40 for each $10,000 invested

10. Direxion Zacks High Income MLP Shares (ZMLP), which will invest in 25 stocks selected from a universe of master limited partnerships listed on domestic exchanges, and which has a net expense ratio of 0.65 percent, or $65 for every $10,000 invested, according to a regulatory filing.

Filings

  • USCF Advisors has put into motion regulatory paperwork to launch the Stock Split Index Fund, which will invest in companies that have recently undergone a stock split of two new shares for every one existing share. The fund is benchmarked against the 2 For 1 Index and has a net expense ratio of 0.55 percent, or $55 for every $10,000 invested.
  • Direxion has filed paperwork seeking exemptive relief to launch active ETFs, including its first proposed active fund dubbed the Direxion Active Asset Allocation Shares ETF, which will invest in shares of other investment companies, primarily ETFs, and other types of securities such as common and preferred stock, convertible securities, credit-linked notes and indexed floating-rate securities, and private placements.

 

 

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