Daily ETF Watch: New IPO ETF Goes Global

October 07, 2014

The roundup of ETF launches and filings includes new takes on IPOs, factor-based investing and a yield-seeking ETF.

Renaissance Capital, the investment advisor behind the Renaissance IPO ETF (IPO | C-34), today launched an international, ex-U.S. version of its one-year-old IPO, offering investors access to newly public companies before they are included in core global equity portfolios.

The Renaissance International IPO ETF (IPOS) is designed to complement its U.S.-only counterpart, and together the two funds cover the entire global IPO market, the company said in a press release. It has an annual expense ratio of 0.80 percent, or $80 per $10,000 invested.

The launch is timely to the extent that the IPO market has been booming. So far in 2014, IPOs in the U.S. alone are up 36 percent year-on-year, and IPO proceeds are also up. Perhaps the most noteworthy IPO of the year was Alibaba’s. The Chinese e-commerce giant raised more than $22 billion in September.

Like Renaissance’s first ETF, “IPO,” the new ETF also focuses on initial public offerings that are “economically significant.” These newly public companies are added to the portfolio as soon as five days after they first list.

Roughly 19 percent of IPOS’ portfolio is tied to the U.K., and 11.5 percent is allocated to Japan. Emerging markets represent about a quarter of the overall mix.

Filings

  • ArrowShares Equity Factor ETF

ArrowShares filed paperwork detailing the ArrowShares Equity Factor ETF—the latest fund to join in the “strategic beta” wave of product development.

The fund will track a proprietary index and invest in U.S. equities of any market capitalization that are picked through fundamental analysis. The methodology screens for factors such as quality rankings that measure profitability, consistency of earnings, and management confidence, according to the prospectus.

  • TFMS HIPS 300 ETF

ETF Series Solutions detailed plans for the TFMS HIPS 300 ETF, a passively managed ETF that will invest in 300 high-income U.S. equities.

These companies typically have “pass-through” structures that require them to distribute the bulk of their earnings to shareholders as cash distributions. This “high income, pass-through” strategy is known as HIPS, according to the prospectus.

The fund will look for these high-income securities across various sectors, including closed-end funds, REITs, asset management and business development companies, and energy production, transportation and processing companies structured as MLPs.

The selection process relies on a quantitative screen that looks for minimum sector-specific yields relative to the yield of the S&P 500, minimum market capitalizations and minimum liquidity thresholds, the filing said.

 

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