Daily ETF Watch: Principal Launches 1st Fund

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.

An ETF Veteran Returns

A newcomer to the ETF scene appeared recently with simultaneous filings for exemptive relief and an actual ETF. BetaClone Advisers is based in Oakland, California, and headed by John Hyland, formerly chief investment officer of United States Commodity Funds and a well-known figure in the ETF industry.

BetaClone’s 40-APP filing outlined its ETF plans, making the standard request for permission to launch domestic and foreign fixed-income and equity ETFs as well as self-indexed funds, 130/30 funds and long/short funds. It also requested permission to use a master-feeder structure.

The fund filing covers the BetaClone Buyback Index Fund, which is slated to list on the NYSE Arca, but does not provide much detail. The ETF will track an unnamed index that will include companies that have reduced their net shares outstanding by 5 percent in the last 12-month period. The list of risks provided in the prospectus suggests that the fund will invest primarily in U.S. equities, including large-, mid- and small-cap stocks.

There are already a few buyback-focused domestic ETFs on the market right now. The largest is the nearly $3 billion PowerShares Buyback Achievers ETF (PKW | B-94); it launched in late 2006. Another fund, the SPDR S&P 400 Buyback ETF (SPYB), launched in February of this year but has not accumulated significant assets. However, with all the speculation about corporations deploying their cash reserves, it’s easy to see why firms are looking to roll out buyback funds at this point in time.

The BetaClone filing did not include a ticker or expense ratio.