Daily ETF Watch: ETF Securities Branches Out

ETFS, known for its commodity-focused ETFs, is moving into the equities space.

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Reviewed by: Heather Bell
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Edited by: Heather Bell

ETFS, known for its commodity-focused ETFs, is moving into the equities space.

The summer slowdown in filings is picking up, with filings from ETF Securities, State Street Global Advisors and Pacer Financial that should stir investor interest. ETFS is looking to expand its lineup to include equities funds, while SSgA has outlined its plans to launch another actively managed ETF. Meanwhile, newcomer Pacer is laying the groundwork to enter the ETF market as a first-time issuer.

ETFS Embraces Equities

ETF Securities, a longtime presence in the physical and futures-based commodity ETFs space, has filed paperwork with the Securities and Exchange Commission that outlines plans for its first equity ETFs.

In January, the firm had requested exemptive relief necessary to launch actively managed ETFs, and followed up with another exemptive relief request in March that suggested the firm wanted to launch index-based, self-indexed and fund-of-funds ETFs. The latest filing is the first to address specific ETFs and describes a small-cap and a large-cap fund, both of which would track indexes from Zacks.

The ETFS Zacks Earnings Large-Cap U.S. Index Fund and the ETFS Zacks Earnings Small-Cap U.S. Index Fund will be based on a methodology that equal-weights 16 different sectors and then equal-weights the individual stocks within each of those sectors.

The large-cap ETF is expected to cover 140 components selected from the largest 1,000 U.S. stocks that meet certain price and liquidity requirements, while the small-cap ETF will track 180 components selected from the next 2,000 largest components, according to the initial prospectus.

Components selected for the index will be chosen based on a combination of earnings quality and earnings estimates, the filing indicated. It did not include expense ratios or tickers, but it did note the funds would launch on the NYSE Arca exchange.

Between the earnings-based selection methodology and the nontraditional weighting approach, ETFS looks to be joining the smart-beta wave. But this isn’t the only commodities ETF issuer to reach into the equities spaces—United States Commodity Funds, as USCF Advisers, filed for exemptive relief back in February, and also outlined plans for an ETF based on stock splits in January.

 

SSgA Plans Active Infrastructure/MLP ETF
SSgA has filed for an actively managed ETF that will target infrastructure stocks and MLPs. The SPDR Clarion Global Infrastructure & MLP Portfolio targets companies that generate at least half of their revenues or profits from infrastructure-related assets or that have dedicated at least half of their assets to infrastructure-related business activities, according to the initial prospectus.

The fund will be subadvised by CBRE Clarion Securities LLC, a firm that specializes in investing in “real assets.” The fund’s investment methodology divides infrastructure assets into the areas of transportation, utilities, communications and energy.

MLPs fall into the energy bucket, and the filing notes that registered investment companies can only invest up to 25 percent of their assets in such securities.

The fund’s managers will take a top-down approach to regional and sector allocations, and a bottom-up approach to selecting individual stocks.

The prospectus also says that at least 40 percent of the fund’s assets will be invested in equities issued by companies that are “economically tied” to foreign countries, including developed as well as emerging markets.

The filing did not include a ticker or expense ratio.

There currently aren’t any actively managed infrastructure ETFs on the market, but it’s a sector that’s been in the spotlight quite a bit over the past few years.

Pacer Seeks Exemptive Relief

Pacer Financial, a distributor and marketer of financial products to financial advisors, requested exemptive relief that would allow it to launch index-based ETFs, including self-indexed funds, long/short funds and 130/30 funds.

The firm has previously partnered with ETF issuer RevenueShares to market that line of funds, and is currently partnered with RBS, helping to market the firm’s lineup of exchange-traded notes. Pacer does not appear to have previously launched any in-house products of its own.

 

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.