Daily ETF Watch: Pointbreak Plans IPO Fund

May 20, 2016

Pointbreak ETFs, the firm founded by U.S. Commodity Funds’ former CIO John Hyland, has put another fund into registration, this one targeting initial public offerings. The Pointbreak IPO Index Fund (PBIQ) will track the FactSet U.S. IPO Index and list on the Bats exchange, wich owns ETF.com.

The IPO fund’s index will select its components from the list of U.S. companies that have issued stock within the last three years, either due to an initial public offering or a spinoff, the prospectus noted, with new IPOs and spinoffs being added if they have launched in the three months prior to the reconstitution date. Potential components must have market capitalizations of at least $250 million and meet liquidity requirements.

Companies are usually removed from the index three years after their IPO or spinoff date, but if they rank within the top half of the selection universe, they can remain in the universe for another 12 months.

Generally, the index selects the 60-largest eligible stocks in the universe in terms of market capitalization. However, the index is reconstituted quarterly, and there are buffers in place to keep turnover down.

Issues that are not common stocks are excluded from the index, the prospectus notes. That includes firms like business development companies, master limited partnerships, American depository receipts, and other equities and exchange-traded vehicles.

The index uses a modified market-capitalization weighting approach, capping individual components at 10% weights during rebalancings and limiting the aggregate weight of companies with individual weights of more than 4.5% to 45% of the total index, the prospectus said.

The largest IPO ETF currently trading is the First Trust US IPO Index Fund (FPX | B-65), which has been trading for a decade and has nearly $570 million in assets under management. FPX has a similar methodology to the Pointbreak filing, but it includes companies up to four years after their IPO or spinoff.

The new filing did not include an expense ratio.

Contact Heather Bell at [email protected].

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