Daily ETF Watch: 2 New Smart Beta Funds

June 18, 2015

iShares just added two more factor-focused ETFs to its lineup. The iShares MSCI International Developed Size Factor ETF (ISZE) and the iShares MSCI International Developed Value Factor ETF (IVLU) join two other funds derived from the cap-weighted MSCI World ex USA Index, which covers 22 developed markets.

 

The iShares MSCI International Developed Momentum Factor ETF (IMTM) and the MSCI International Developed Quality Factor ETF (IQLT) rolled out in January, and like the two funds launching today, charge an expense ratio of 0.30 percent.

 

The momentum and quality funds have not gathered much in the way of assets, about $5.5 million apiece. That’s in stark contrast to the factor-based U.S. funds the firm launched last year, which were seeded with $100 million each from the Arizona State Retirement System. AZSRS uses those funds to adjust the exposures of its equity portfolio.

 

Perhaps with a full suite of factor-based funds targeting the same subset of stocks, the four will see more assets roll in.

 

Direxion Plans More Bull/Bear Pairs
A recent filing from Direxion outlines the firm’s plans to roll out six ETFs providing 2X or -2X exposure to three different indexes and six ETFs providing 3X or -3X exposure to the same indexes.

 

The double-exposure funds and their planned expense ratios are as follows:

·        Direxion Daily MSCI Germany Currency Hedged Bull 2X Shares, 1.08 percent

·        Direxion Daily MSCI Germany Currency Hedged Bear 2X Shares, 0.95 percent       

·        Direxion Daily Cyber Security Bull 2X Shares, 1.14 percent

·        Direxion Daily Cyber Security Bear 2X Shares, 0.95 percent

·        Direxion Daily Pharmaceutical Bull 2X Shares, 1.10 percent

·        Direxion Daily Pharmaceutical Bear 2X Shares, 0.95 percent

 

The triple-exposure funds include:

·        Direxion Daily MSCI Germany Currency Hedged Bull 3X Shares, 1.08 percent

·        Direxion Daily MSCI Germany Currency Hedged Bear 3X Shares, 0.95 percent

·        Direxion Daily Cyber Security Bull 3X Shares, 1.14 percent

·        Direxion Daily Cyber Security Bear 3X Shares, 0.95 percent

·        Direxion Daily Pharmaceutical Bull 3X Shares, 1.10 percent

·        Direxion Daily Pharmaceutical Bear 3X Shares, 0.95 percent

 

The four Germany funds provide leveraged/inverse access to the same underlying index used by the iShares Currency Hedged MSCI Germany ETF (HEWG | D-48) and the Deutsche X-trackers MSCI Germany Hedged Equity ETF (DBGR | B-67), which have $1.8 billion and $214 million in assets under management respectively.

 

Meanwhile, the cybersecurity funds are tied to the same index as the blockbuster PureFunds ISE Cyber Security ETF (HACK | C-24). HACK launched late last year and has already accumulated $941 million in assets under management (AUM). The fund is a resounding success, with inflows being driven at least in part by recent concerns about Internet security.

 

Finally, the two pairs of pharmaceuticals ETFs will track the same index as the $2 billion PowerShares Dynamic Pharmaceuticals ETF (PJP | B-78). This is the first time Direxion has planned a leveraged or inverse ETF tracking a smart-beta index. PJP’s underlying benchmark relies on a weighting methodology that is based on fundamental and risk factors. The fund is also the largest ETF in the U.S. pharmaceuticals space, at nearly twice the AUM of the next-largest ETF.

 

The six pairs of funds don’t have much in common except for the fact that they are hot investment areas right now.

 

The filing did not include tickers.

 

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