Daily ETF Watch: Global X Plans Luxury ETF

September 02, 2014

Firm plans sector rotation, luxury-focused ETFs.

Global X, an ETF provider known for its niche funds, put two very different index-based ETFs into registration last week. One targets the luxury goods market, and the other implements a strategy using domestic sectors.

A Luxury ETF

The Global X FTSE Luxury Consumer ETF covers publicly traded companies that are focused on “the provision of global luxury goods and services,” according to the prospectus. It goes on to note that the index could include manufacturers and retailers of luxury goods; providers of travel- and leisure-related goods and services; and providers of professional services.

The fund seems reminiscent of the Claymore/Robb Report Global Luxury Index ETF (ROB), which launched in 2007 and closed in 2010. ROB tracked an index developed by The Robb Report, a magazine focused on luxury products and services. Holdings included companies like BMW, Porsche, Christian Dior, Credit Suisse and Coach. However, the fund failed to gather significant assets.

A Different Kind Of Sector Fund
The Global X| JPMorgan US Sector Rotator Index ETF will track an index of ETFs that rebalances monthly, the prospectus said. The index selects its holdings each month from the nine Select Sector SPDR ETFs, the SPDR Dow Jones REIT ETF (RWR | A-85) and the iShares 1-3 Year Treasury Bond ETF (SHY | A-97).

During the rebalancing, the index selects the five equity sector funds with the best positive performance during the previous month and equal-risk-weights them using their realized volatility. However, the fund allocates assets to SHY accordingly when fewer than five of the sector funds exhibit positive performance in the previous month or if the volatility of the five newly selected funds during the prior month crosses over a designated level, according to the prospectus.

Sector-rotation strategies have not fared well in the ETF world, for the most part. AdvisorShares and Guggenheim (then Claymore) both launched funds that rotated among sectors, but neither accumulated enough assets under management to stay open. Currently, the Huntington US Equity Rotation Strategy ETF (HUSE | D-90), an actively managed fund that invests in the 10 sectors of the S&P 1500 Composite Index, is still trading, but it has less than $15 million in assets.

Neither filing provided a ticker or expense ratio for its respective fund; nor did they list the exchanges where the funds would have their primary listings.

 

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