Two different fund providers recently filed paperwork on ETFs that will invest in other ETFs. Northern Trust’s FlexShares' arm is planning a real assets fund that will invest in three other FlexShares products, while the FactorShares Trust has put into registration an ETF that will invest in 50 other ETFs.
FlexShares Plans ‘Real Assets’ Fund
The FlexShares Real Assets Allocation Index Fund will invest in three other funds offered by the FlexShares family that, according to the prospectus, either have “physical properties or inflation sensitive characteristics.”
The component funds include the $1.9 billion FlexShares Morningstar Global Upstream Natural Resources Index Fund (GUNR | B-85), the $98 million FlexShares Global Quality Real Estate Index Fund (GQRE | D-77) and the $375 million FlexShares STOXX Global Broad Infrastructure Index Fund (NFRA | B-52). The prospectus did not include information about how the three ETFs would be weighted in the underlying index, nor how often the index would be rebalanced.
50 ETFs, One Wrapper
Meanwhile, the FactorShares Trust is planning to launch the ETF 50 (ETFF). The index-based fund will invest in 50 other U.S.-listed ETFs that each have at least $100 million in assets under management and a trailing average daily value traded of $1 million for the preceding three-month period. Component funds also must not be leveraged or inverse and cannot be ETNs.
From that universe, the methodology scores each fund based on their fees, their one-month total return and their volatility, then combines those scores into one composite score. The top 25 equity funds based on their composite scores are selected for the index, as are the top 25 nonequity funds.
The fund is reconstituted quarterly, with all of its components equally weighted.
Aside from the fact that both products are funds of funds, they also will occupy unique niches. The proposed ETFs are slated to list on the NYSE Arca exchange. The filings did not include expense ratios, and the FlexShares filing did not include a ticker.
Contact Heather Bell at [email protected].