Daily ETF Watch: New Fund Cuts Fossil Fuels

Users of a mobile app can vote on ETF’s holdings.

Reviewed by: Heather Bell
Edited by: Heather Bell

State Street Global Advisors has followed up last year’s launch of the SPDR MSCI ACWI Low Carbon Target ETF (LOWC | D-94) with a similarly focused fund that targets the stocks of the S&P 500. The SPDR S&P 500 Fossil Fuel Free ETF (SPYX) tracks an index that is a subset of the S&P 500 and excludes companies that own fossil fuel reserves.

The prospectus notes that the fund tends to have higher concentrations in the technology, financial and health care sectors than the S&P 500 Index because of the exclusion of companies that hold reserves of crude oil, natural gas and thermal coal. SPYX’s index had 475 components as of the end of September.

The fund, which was launched on the NYSE Arca exchange, comes with an expense ratio of 0.20%.

A Crowdsourced Index Fund

In what could be the ultimate filing of the cyberage, Exchange Traded Concepts has filed for a fund based on an index provided by Centerboard Ventures Corp. The ETF will track an index created by users of the firm’s mobile app, the CrowdInvest Internet Platform.

The CrowdInvest Wisdom ETF’s underlying benchmark can include any U.S.-listed stock with an average daily trading volume of at least $15 million over the preceding 20-day period. Every month, the users of the app can vote on long, short or flat positions for eligible stocks. The top 35 companies with the most long votes after their short votes are subtracted and selected to be the index components for the following month, according to the prospectus. Index weightings are based on the number of votes the components received.

However, only four components can be replaced each month, and if there are not enough votes to determine weightings, all of the components are weighted equally.

This would be the first ETF to track a crowdsourced index. Presumably, investors in the fund would have to have a certain amount of trust in the judgment of the app’s users. The prospectus lists “Platform User Bias” as one of the ETF’s risks, and warns that the app users voting on the index’s components are not necessarily professional investors and could be subject to “cognitive and emotional biases.”

Vident Investment Advisory will serve as the fund’s subadvisor. The filing did not include a listing exchange, a ticker or an expense ratio.

Contact Heather Bell at [email protected].

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.