Daily ETF Watch: ETF Securities Branches Out

August 19, 2014

ETFS, known for its commodity-focused ETFs, is moving into the equities space.

The summer slowdown in filings is picking up, with filings from ETF Securities, State Street Global Advisors and Pacer Financial that should stir investor interest. ETFS is looking to expand its lineup to include equities funds, while SSgA has outlined its plans to launch another actively managed ETF. Meanwhile, newcomer Pacer is laying the groundwork to enter the ETF market as a first-time issuer.

ETFS Embraces Equities

ETF Securities, a longtime presence in the physical and futures-based commodity ETFs space, has filed paperwork with the Securities and Exchange Commission that outlines plans for its first equity ETFs.

In January, the firm had requested exemptive relief necessary to launch actively managed ETFs, and followed up with another exemptive relief request in March that suggested the firm wanted to launch index-based, self-indexed and fund-of-funds ETFs. The latest filing is the first to address specific ETFs and describes a small-cap and a large-cap fund, both of which would track indexes from Zacks.

The ETFS Zacks Earnings Large-Cap U.S. Index Fund and the ETFS Zacks Earnings Small-Cap U.S. Index Fund will be based on a methodology that equal-weights 16 different sectors and then equal-weights the individual stocks within each of those sectors.

The large-cap ETF is expected to cover 140 components selected from the largest 1,000 U.S. stocks that meet certain price and liquidity requirements, while the small-cap ETF will track 180 components selected from the next 2,000 largest components, according to the initial prospectus.

Components selected for the index will be chosen based on a combination of earnings quality and earnings estimates, the filing indicated. It did not include expense ratios or tickers, but it did note the funds would launch on the NYSE Arca exchange.

Between the earnings-based selection methodology and the nontraditional weighting approach, ETFS looks to be joining the smart-beta wave. But this isn’t the only commodities ETF issuer to reach into the equities spaces—United States Commodity Funds, as USCF Advisers, filed for exemptive relief back in February, and also outlined plans for an ETF based on stock splits in January.

 

 

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