Daily ETF Watch: Dividend Growth Targeted

April 06, 2015

FQF Trust, the provider of the QuantShares ETFs, recently revealed plans for another five funds in a filing that perhaps should have been made on St. Patrick’s Day.

 

The O’Shares ETFs will adopt a “Defensive Dividend Growth” strategy, targeting only companies that have paid stable or increasing dividends over the short term and increasing dividends over a three-year period. Market capitalization and liquidity requirements have yet to be identified.

 

However, the indexes will also exclude the “highest percentile” dividend payers, according to the prospectus. The intention of that methodology tweak is to weed out companies that are in trouble or have a likelihood of lowering their dividends.

 

The five funds detailed in regulatory paperwork include a U.S. fund and unhedged and currency-hedged Europe and Asia funds, respectively:

 

  • O’Shares Defensive Dividend Growth ETF
  • O’Shares Europe Defensive Dividend Growth ETF
  • O’Shares Europe Hedged Defensive Dividend Growth ETF
  • O’Shares Asia Pacific Defensive Dividend Growth ETF
  • O’Shares Asia Pacific Hedged Defensive Dividend Growth ETF

 

Once the selection universe is set, the methodology selects stocks based on their volatility ranking, with preference given to lower-volatility securities, and based on their sector classification.

 

The U.S. fund can include REITs and business development companies, in addition to traditionally structured public companies. Meanwhile, the currency-hedged funds will incorporate one-month currency-forward contracts into their portfolios as a hedging strategy.

 

The QuantShares lineup currently has five funds, including the recently launched QuantShares Hedged Dividend Income Fund (DIVA). The entire ETF family has roughly $15 million in assets under management.

 

The filing did not include tickers or expense ratios, but it did note that the funds are slated to list on the NYSE Arca.
 

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