Daily ETF Watch: Highland Plans 17 Funds

January 22, 2015

Highland Capital Management, which launched its only ETF more than two years ago, recently put a whopping 17 funds into registration, indicating the firm has ambitious plans for the ETF market.

 

On its website, Highland describes itself as a “global alternative credit manager,” and in addition to the Highland/iBoxx Senior Loan ETF (SNLN | C), it offers a family of traditional mutual funds covering equities, fixed income and alternative investment strategies. The funds in the filing clearly represent the firm’s specialization in alternative investments, with most of their names evoking hedge fund strategies.

 

Not a lot of information is provided about the strategies of the funds listed in the filing or the construction of their underlying indexes, but the prospectus repeatedly notes that the funds will not hold actual hedge funds. Rather, they will seek to approximate hedge fund returns for their designated strategy by holding securities held by the actual hedge funds.

 

The proposed funds include:

  • Highland Equity Hedge Fundamental Growth ETF
  • Highland Equity Hedge Fundamental Value ETF
  • Highland Equity Hedge Multi-Strategy ETF
  • Highland Equity Hedge Technology ETF
  • Highland Equity Hedge Healthcare ETF
  • Highland Event-Driven Activist ETF
  • Highland Event-Driven Credit Arbitrage ETF
  • Highland Event-Driven Merger Arbitrage ETF
  • Highland Event-Driven Multi-Strategy ETF
  • Highland Macro Discretionary Thematic ETF
  • Highland Macro Multi-Strategy ETF
  • Highland Relative Value Fixed-Income Asset Backed ETF
  • Highland Relative Value Fixed-Income Convertible Arbitrage ETF
  • Highland Relative Value Fixed-Income Corporate ETF
  • Highland Relative Value Fixed-Income Sovereign ETF
  • Highland Relative Value Volatility ETF
  • Highland Relative Value Multi-Strategy ETF

 

SNLN has been a one-off success story, accumulating more than $310 million in assets under management since its 2012 launch. It remains to be seen if the funds in the latest filing will attain that level of success, if they do launch.

 

Hedge fund replication ETFs have had a notoriously hard time finding a foothold. The largest fund in the space is the IQ Hedge Multi-Strategy Tracker Fund (QAI | B-73), which launched in 2009 and has almost $1 billion in assets under management. It’s significantly larger than its competitors, by several hundred million dollars.

 

QAI seeks to capture the returns of three different hedge fund strategies—global macro, long/short and fixed-income arbitrage—mainly by investing in other ETFs, whereas the Highland funds sound like they will be investing in individual securities.

 

The filing for the Highland Capital Management ETFs did not include any expense ratios or tickers, but it did indicate that all of the funds will list on the NYSE Arca.

 

 

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