Daily ETF Watch: Innovation Fund Debuts

January 14, 2016

SSgA rolls out an innovation-focused ETF based on an index from FactSet.

 

 

State Street Global Advisors is breaking into the innovation theme that has become increasingly popular in the last year with a new fund. The SPDR FactSet Innovative Technology ETF (XITK) targets the foreign and U.S. companies falling into FactSet’s technology sector and electronic media subsector that exhibit the highest revenue growth relative to their peers.

 

 

 

 

XITK’s holdings must be U.S.-listed stocks or American depositary receipts that meet certain size and liquidity requirements, the prospectus said. The index is equal-weighted, meaning smaller companies will not be overwhelmed in the index by much larger ones. Weightings are reset on an annual basis.

 

 

 

 

As of the end of 2015, XITK’s benchmark had 85 components.

 

 

 

 

XITK comes with an expense ratio of 0.45%.

 

 

 

 

Reality Shares Adds 2 More ETFs

 

 

Reality Shares, a relative newcomer to the ETF scene, is launching two more funds today on the BATS exchange. The Reality Shares DIVCON Dividend Defender ETF (DFND) and Reality Shares DIVCON Dividend Guard ETF (GARD) are both long/short portfolios that use the firm’s DIVCON scoring system to build their portfolios.

 

 

The DIVCON selection universe includes the 500 largest U.S.-listed companies in terms of market capitalization. The methodology then winnows down that number by excluding any companies that have not both paid a dividend in the past 12 months and announced a future dividend payment during the prior 12-month period. From there, the DIVCON methodology assigns the remaining stocks to one of five tiers using quantitative criteria.

 

 

 

 

Just last week, Reality Shares rolled out the Reality Shares DIVCON Leaders Dividend ETF (LEAD), a long-only portfolio targeting stocks that the DIVCON methodology indicates are the most likely to raise their dividend.

 

 

 

 

According to the prospectus, DFND basically shorts the stocks in the DIVCON universe that are most likely to lower their dividend and takes long positions in the DIVCON stocks most likely to raise their dividend. Its short portfolio consists of short positions in the 10 stocks most likely to lower their dividend or all of the DIVCON 1 stocks, depending on which represents the greatest number of holdings. The long portfolio holds either all of the DIVCON 5 stocks or the 30 stocks most likely to raise their dividend, depending on which is the greatest number of holdings.

 

 

 

 

GARD, however, is a little more complex. It relies on the firm’s “Guard Indicator” to determine whether its portfolio will consist of an entirely long portfolio or if the portfolio will adopt a 50% long/50% short approach. The indicator measures market strength, taking into account long- and short-term trends in market prices and volatility for the 10 major market sectors, the prospectus said.

 

 

 

 

When the indicator shows market strength, GARD’s portfolio will solely hold long positions in the DIVCON 5 stocks or the 30 stocks in the universe that are most likely to raise their dividend, depending on which reflects the greater number of holdings. When the indicator suggests market weakness, GARD’s portfolio allocates 50% of its weight to the long portfolio and 50% to a short portfolio consisting of either the 10 stocks most likely to lower their dividend or all of the DIVCON 1 stocks, depending on which represents the greater number of holdings.

 

 

 

 

Both GARD and DFND come with net expense ratios of 0.95%.

 

 


Contact Heather Bell at [email protected].

 

 

 

 

 

 

 

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