Daily ETF Watch: FT Debuts Long/Short Fund

September 09, 2014

First Trust to launch an actively managed alternative ETF.

First Trust today is rolling out an actively managed long/short ETF that will canvass U.S. and international equity markets, according to an NYSE communique.

The First Trust Long/Short Equity ETF (FTLS) invests in other U.S.-listed equity securities for foreign and domestic firms, including U.S.-listed ETFs that cover domestic and international markets. Long and short positions will be taken based on fundamental, market-related, technical and statistical analysis as well as the assistance of quantitative tools, the prospectus said.

First Trust anticipates that long positions will represent 90 to 100 percent of the fund’s portfolio, with short positions representing zero to 5 percent, the prospectus said.

The biggest competitor in the long/short equity space is the passively managed ProShares RAFI Long/Short ETF (RALS | D-82), which has more than $65 million in assets under management. The index methodology uses fundamentals to determine its positions in individual equities.

The second-largest fund in the space is the AdvisorShares Accuvest Global Long Short ETF (AGLS | F-39). Like FTLS, it’s actively managed, but it takes its long and short positions in other ETFs exclusively – primarily country ETFs chosen based on Accuvest’s geographic analysis. The fund is quite expensive and has managed to gather less than $30 million in assets under management.

FTLS comes with an expense ratio of 0.99 percent, or $99 per $10,000 invested. Index-based RALS charges just 4 basis points less, and AdvisorShares’ AGLS charges about 4.28 percent, according to ETF.com.

TrimTabs Plans 2 ETFs

TrimTabs Investment Research is dipping its toe in the ETF waters on its own with a filing outlining plans for two equity ETFs.

The firm already subadvises the AdvisorShares TrimTabs Float Shrink ETF (TTFS | B-78), an actively managed fund that selects its holdings based on trends in outstanding shares, firm leverage and free cash flow.

The TrimTabs U.S. Free-Cash-Flow ETF (FCFD) and TrimTabs Intl Free-Cash-Flow ETF (FCFI) will both track equal-weighted indexes that cover the top companies in their respective selection universes as determined by free-cash-flow yield, the prospectus said. For the domestic fund, that’s the top 10 percent of the investment universe; for the international fund, it’s the top 20 percent.

The broad international index can be broken into 10 subindexes covering individual countries: Australia, Canada, China, France, Germany, Japan, Korea, the Netherlands, Switzerland and the United Kingdom.

Both funds will list on the NYSE Arca exchange. The filing did not specify an expense ratio for either fund.

PowerShares To Launch LadderRite ETF

A trader alert from the Nasdaq Stock Exchange said that Invesco PowerShares will roll out its second laddered bond fund on Wednesday, Sept. 10.

The PowerShares LadderRite 0-5 Year Corporate Bond Portfolio (LDRI) will target an overall universe of investment-grade corporate bonds with five years or less left on their maturity, but it will use a laddering strategy that groups the components according to their maturity dates.

Although there are no other firms that offer laddered-strategy ETFs, PowerShares rolled out the PowerShares 1-30 Laddered Treasury Portfolio (PLW | B-56) in 2007. The fund has amassed more than $265 million in assets under management.

LDRI will come with an expense ratio of 0.22 percent, or $22 for each $10,000 invested.

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