Daily ETF Watch: 3 Funds Launch Tuesday

IndexIQ rolls out two hedge-fund ETFs, while Lattice adds global small-cap fund.

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Reviewed by: Heather Bell
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Edited by: Heather Bell

IndexIQ added to its lineup of hedge-fundlike ETFs today with the launch of funds using long/short and event-driven strategies. At the same time, Lattice Strategies rolled out its fourth ETF, a global small-cap fund. The funds bring the total number of launches this week to four after iShares rolled out its exponential technologies fund on Monday.

 

IndexIQ Adds To Hedge Lineup
With the launch of two more ETFs, IndexIQ—which is in the process of being acquired by New York Life—has brought its total offering of hedge-fund replication ETFs up to six funds. The IQ Hedge Event-Driven Tracker ETF (QED) and the IQ Hedge Long/Short Tracker ETF (QLS) are both index-based funds-of-funds that seek to capture the performance of their respective hedge fund strategies by investing in other exchange-traded products.

 

QED has a 49 percent position in the SPDR Barclays Convertible Securities ETF (CWB | C), followed by a nearly 33 percent position in the Vanguard Total Bond Market Index Fund (BND | A-94) and a 25 percent position in the iShares Russell 1000 Growth ETF (IWF | A-91). It holds a short position in the iShares Core U.S. Credit Bond ETF (CRED | B-89) of -8.57 percent. The fund comes with a total annual expense ratio of 1.00 percent.

 

QLS’ current top holdings include a weighting of more than 40 percent in the PowerShares Senior Loan Portfolio (BKLN | C) and additional long exposure to growth equity ETFs, with short exposure to value equity ETFs. It has a total annual expense ratio of 1.10 percent.

 

Lattice Debuts Small-Cap Global Fund
Lattice Strategies rounded out its initial offering of three smart-beta funds that cover emerging markets, developed markets and the U.S. with today’s rollout of the Lattice Global Small Cap Strategy ETF (ROGS).

 

Lattice uses a risk-optimized approach in its funds, seeking to balance the risks that are unique to each asset class. ROGS’ index targets such factors as valuation, momentum and quality, while allocating among volatility, country and liquidity risks. It targets stocks with market capitalizations between $500 million and $8 billion.

 

ROGS comes with an expense ratio of 0.60 percent.

 

iShares Delves Into Innovation

iShares rolled out a new ETF on Monday that targets companies that use and create cutting-edge technologies like big data and nanotechnology. The fund tracks a 200-stock global index provided by Morningstar, and it joins a few other notable innovation-oriented ETFs.

 

The iShares Exponential Technologies ETF (XT) is based on the premise that exponential technologies “displace older technologies, create new markets and have the potential to effect significant economic impacts,” according to its prospectus. The fund targets companies with at least $300 million in market capitalization and three-month daily trading volumes of at least $2 million from developed as well as emerging markets.

 

Components are selected based on themes that can be updated annually based on shifts in technology. XT’s prospectus lists the current nine themes as: big data and analytics, nanotechnology, medicine and neuroscience, networks and computer systems, energy and environmental systems, robotics, 3-D printing, bioinformatics and financial services innovation. Companies are selected based on the themes they represent and their scores on a three-point scale, with current index members and small-cap stocks given preference.

 

The fund is evocative of the ARK Innovation ETF (ARKK), which launched in October of last year and has about $6 million in assets under management. The actively managed ETF covers disruptive innovation in the industrial, genomics and cloud computing spaces. ARKK has an expense ratio of 0.95 percent.

 

Horizons Closure

Horizons has closed one of its covered-call funds, leaving it with just two funds listed in the U.S. The Horizons S&P Financial Select Sector Covered Call ETF (HFIN | F-76) ceased trading yesterday. It had $1.25 million in assets under management the day before it shut down.

 

Meanwhile, the more broadly based Horizons S&P 500 Covered Call ETF (HSPX | C-80) is much more popular, with $78 million in assets.

 

HFIN is the 11th ETF to shut down so far this year.

 

Direxion Plans 16 Currency-Hedged Leveraged, Inverse ETFs

A recent filing from Direxion outlines plans for a family of 16 funds tied to currency-hedged equity indexes from MSCI. Although there has been a wave of currency-hedged equity ETF launches in the last few years, currently none of those hedged funds offers any leveraged or inverse exposure.

 

The Direxion filing is the first of its kind, and covers the key MSCI indexes in the international space: MSCI EAFE as well as the emerging markets; Japan ETFs; and Europe ETFs. Eight of the funds provide double exposure via four “bull/bear” pairs of funds, while the other eight do the same with triple exposure.

 

The proposed funds’ underlying indexes align with those of some of the long-only currency-hedged funds launched by Deutsche Bank and iShares.

 

The eight double-exposure ETFs each come with an expense ratio of 0.60 percent, or $60 per $10,000 in investment. They include the following:

 

  • Direxion Daily Currency Hedged MSCI EAFE Bull 2X Shares                          
  • Direxion Daily Currency Hedged MSCI EAFE Bear 2X Shares
  • Direxion Daily Currency Hedged MSCI Emerging Markets Bull 2X Shares
  • Direxion Daily Currency Hedged MSCI Emerging Markets Bear 2X Shares
  • Direxion Daily Currency Hedged MSCI Europe Bull 2X Shares                      
  • Direxion Daily Currency Hedged MSCI Europe Bear 2X Shares
  • Direxion Daily Currency Hedged MSCI Japan Bull 2X Shares          
  • Direxion Daily Currency Hedged MSCI Japan Bear 2X Shares

 

The eight triple-exposure ETFs each have an expense ratio of 0.95 percent. They include the following:

 

  • Direxion Daily Currency Hedged MSCI EAFE Bull 3X Shares                          
  • Direxion Daily Currency Hedged MSCI EAFE Bear 3X Shares
  • Direxion Daily Currency Hedged MSCI Emerging Markets Bull 3X Shares               
  • Direxion Daily Currency Hedged MSCI Emerging Markets Bear 3X Shares
  • Direxion Daily Currency Hedged MSCI Europe Bull 3X Shares                      
  • Direxion Daily Currency Hedged MSCI Europe Bear 3X Shares
  • Direxion Daily Currency Hedged MSCI Japan Bull 3X Shares                         
  • Direxion Daily Currency Hedged MSCI Japan Bear 3X Shares

 

All of the funds are slated to list on the NYSE Arca exchange.

 

Heather Bell is a former managing editor of etf.com. She has also held editorial positions at Dow Jones Indexes and Lehman Brothers. Bell is a graduate of Dartmouth college and resides in the Denver area with her two dogs.