Daily ETF Watch: Principal Launches 1st Fund

July 09, 2015

Three funds from two different ETF providers rolled out today on the NYSE Arca exchange, and a well-known figure in the ETF space has gone out on his own to launch his own funds. But the really big news is that one of the firms launching a fund today is Principal Financial Group, a global company with roughly $500 billion in assets under management.

Principal Fields First ETF
Principal Financial Group launched its first ETF, the Principal EDGE Active Income ETF (YLD), an actively managed fund that invests in both debt and equities to provide current income to its investors.

According to its prospectus, YLD invests in both investment-grade and high-yield debt, in addition to dividend-paying equities. The equity portion can include emerging and developed-market equities as well as MLPs and REITs.

The fund has two firms serving as subadvisors and portfolio managers—Edge Asset Management and Principal Global Investors. Edge Asset Management uses a tactical approach to allocate toward asset classes based on economic indicators and changing economic conditions.

The fund comes with an expense ratio of 0.85 percent, or $85 per $10,000 investment.

WisdomTree Debuts 2 Funds

WisdomTree rolled out two funds today that add to two very different parts of their product lineup. The WisdomTree Barclays U.S. Aggregate Bond Enhanced Yield Fund (AGGY) is basically the latest addition to the smart-beta fixed-income space, while the WisdomTree International Hedged Equity Fund (HDWM) further expands the firm’s offering of currency-hedged equity funds.

AGGY basically tracks an enhanced version of the Barclays U.S. Aggregate Index that seeks to achieve a higher level of yield than the parent index but keep the same risk characteristics. It does this by reweighting 20 subgroups of the parent index that represent different risk dimensions associated with investment-grade debt securities. The subgroups are based on sector, quality and maturity standards, and allocate more weight to the groups with higher yields.

AGGY comes with an expense ratio of 0.12 percent; that’s only a little more expensive than the 8 basis points charged by the plain-vanilla Barclays Aggregate ETFs offered by Vanguard and iShares.

HDWM similarly offers a twist on an existing index. It’s basically a currency-hedged version of the WisdomTree DEFA Index that underlies the WisdomTree DEFA Fund (DWM | B-92). Both funds track dividend-weighted indexes that cover the world’s developed markets as defined by WisdomTree but exclude Canada and the U.S.

Interestingly, the prospectus does not make any mention of the DEFA fund, so it does not appear that HDWM will be investing in it and just applying the currency hedge.

DWM is one of the firm’s oldest successful funds, launching in 2006. It currently has nearly $700 million in assets under management. Interestingly, it charges 48 basis points, while the newcomer with the currency hedge, HDWM, charges just 35 basis points.

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