Daily ETF Watch: China, Factor ETFs Launch

April 16, 2015

State Street Global Advisors and Direxion both rolled out funds today. For Direxion, the launch expanded its lineup of 200 percent exposure leveraged ETFs, while SSgA has added a U.S. fund to its lineup of ETFs based on the MSCI Quality Mix Index family.

 

Meanwhile, PowerShares has planned a high-income fund that hedges downside risk, and New York Life Investment Management has finalized its purchase of IndexIQ.

 

Direxion Adds Leveraged China Fund

Direxion debuted the Direxion Daily CSI 300 China A Share Bull 2X ETF (CHAU), which tracks one of the premier China indexes. It’s the same benchmark tracked by the $1.2 billion Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR | D-53). CHAU aims to provide twice the daily return of its underlying index.

 

Direxion has been expanding its lineup of 2X Bull ETFs, as well as 1.25X Bull ETFs, as part of what appears to be a shift in direction from the 3X funds that established the firm as one of the leading providers of leveraged and inverse funds. Lower degrees of leverage may appeal to investors wary of the risks that come with triple leverage.

 

It comes with a 1.11% expense ratio.

 

SSgA Expands Quality Mix Lineup

With the launch of the SPDR MSCI USA Quality Mix ETF (QUS), SSgA has added a domestic fund to its lineup of internationally focused Quality Mix ETFs. The fund comes with an expense ratio of 0.15 percent, the same cost as the single-factor U.S. ETFs that were launched by iShares in conjunction with the Arizona State Retirement System.

 

QUS tracks a benchmark comprising three equally weighted indexes: the MSCI USA Value Weighted Index, the MSCI USA Quality Index and the MSCI USA Minimum Volatility Index.

 

The new fund brings the total lineup of Quality Mix SPDRs to 13.

 

 

PowerShares Plans U.S. Hedged Income Fund

PowerShares has filed for a fund that is designed to provide the income sought by so many investors while at the same time protecting the portfolio from major drawdowns. The PowerShares High Income Downside Hedged Portfolio, according to its prospectus, will be actively managed but with a quantitative, rules-based approach and will seek to outperform the S&P High Income Veqtor Index.

 

The fund allocates between an equity component in the form of the S&P High Income Equity Composite Index and a volatility component in the form of the S&P 500 VIX Short Term Futures Index. While the volatility component is created by holding VIX instruments, the equity component is basically a portfolio of stocks corresponding with the equity index’s components.

 

Those components include 150 high-yield securities falling into the categories of preferred stocks, MLPs, REITs and a portfolio of global stocks that are either engaged in the property industry or pay high dividends. When volatility is low, the fund will increase its holdings in the equity portfolio and decrease its allocation to VIX instruments, and vice versa when volatility is high.

 

The closest comparable fund to the PowerShares concept is the VelocityShares Volatility Hedged Large Cap ETF (SPXH | F-79), which owns the stocks of the S&P 500 and hedges that portfolio with an allocation to VIX futures. SPXH comes with an expense ratio of 0.71 percent and has roughly $70 million in assets under management (AUM).

 

The filing did not include a ticker or expense ratio, but it did indicate that the fund is slated to list on the Nasdaq exchange.

 

New York Life Completes IndexIQ Acquisition
New York Life Investment Management (NYLIM) has completed its acquisition of IndexIQ, the exchange-traded fund firm known for its hedge fund replication strategies such as the IQ Hedge Multi-Strategy Tracker ETF (QAI | 56), according to a press release issued by the company.

 

The press release noted that IndexIQ is now an integrated part of NYLIM’s operations, and its products will be integrated into its Mainstay Investments platform.

 

IndexIQ has $1.7 billion in AUM in its 13 ETFs and a single mutual fund. All that is now part of the $310 billion in AUM that NYLIM oversees.

 

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