Daily ETF Watch: Smart Beta Suite Debuts

Direxion Funds rolled out three smart-beta ETFs today that track indexes from Value Line. Although Direxion has several stand-alone funds it classifies as “strategic beta,” this is its only suite of smart-beta funds. They are as follows:

• Direxion Value Line Mid- and Large-Cap High Dividend ETF (VLML)
• Direxion Value Line Small- and Mid-Cap High Dividend ETF (VLSM)
• Direxion Value Line Conservative Equity ETF (VLLV)

The three funds rely on Value Line’s proprietary ranking methodologies.

VLML’s index uses a modified equal-weighting approach and targets companies paying “above average” dividends. The 50 large- and midcap component securities are selected using Value Line’s Timeliness, Performance and Safety Rankings and its Financial Strength Rating.

VLSM uses essentially the same methodology but targets the small- and midcap space. It is not clear if there is any overlap in coverage between the two funds.

VLLV, however, relies primarily on the index provider’s Safety Ranking to select approximately 140 stocks from a universe of approximately 1,700 securities. The Safety Ranking is designed to measure how a stock is likely to weather a market downturn. It is derived from the volatility of a company’s Price Stability Score and Financial Strength Rating.

All three funds come with an expense ratio of 0.58 percent, or $58 for every $10,000 invested, and are listed on the NYSE Arca.

UBS Launches Housing Etracs

Meanwhile, UBS has expanded its lineup of Etracs ETNs by two with the launch of leveraged- and long-exposure homebuilders products on the NYSE Arca. The underlying ISE Exclusively Homebuilders Index tracks companies that build and develop not only homes, but communities.

The Etracs Monthly Reset 2xLeveraged ISE Exclusively Homebuilders ETN due March 13, 2045 (HOML) provides two times the monthly performance of its index; the vast majority of leveraged exchange-traded products reset daily. It comes with an expense ratio of 0.85 percent.

The Etracs ISE Exclusively Homebuilders ETN due March 11, 2015 (HOMX) provides regular long exposure to the same index as HOML. It comes with an expense ratio of 0.40 percent.

8 Funds Close To Launch

It looks like eight funds are set to launch on or around Thursday, March. 12, the latest sign that product development in the rapidly growing $2 trillion U.S. exchange-traded fund industry is showing no signs of slowing down. One is a fund targeting China’s A-Shares market, and the others are part of iShares’ target-date-maturity corporate bond ETF lineup.

CSOP’s First Fund
Hong Kong-based CSOP Asset Management’s first fund to roll out on a U.S. exchange will be the CSOP FTSE China A50 ETF (AFTY).The ETF will track an index that covers the 50 largest “A-Shares” companies whose shares are listed on mainland China stock exchanges in either Shanghai or Shenzhen, according to the prospectus.

The regulatory paperwork also notes that the fund will use a representative sampling approach. That means that while the fund won’t hold the exact 50 securities in the index, it will hold securities that have similar fundamental, investment and liquidity characteristics, the filing said.

CSOP is a renminbi-qualified foreign institutional investor (RQFII), which means it can invest in the A-shares market, according to a quota granted by the Chinese regulatory authorities. CSOP’s website says it is the largest RQFII asset manager. It remains somewhat difficult for investors to invest in China’s A-shares market, but loosening restrictions in recent years have piqued interest outside of China.

Although a newcomer to the U.S. market, CSOP is not new to ETFs. The firm also manages a Hong Kong-listed ETF by the same name as the ETF it is launching in the U.S.; the older fund is traded in both Hong Kong dollars and renminbi. It was launched in August 2012.

AFTY will have an expense ratio of 0.99 percent, or $99 for each $10,000 invested, and will list on NYSE Arca.

iShares Fills Out iBonds Family
iShares is looking like it could roll out a bevy of target-date-maturity investment-grade corporate bond funds on Thursday. Each diversified portfolio of corporate credits, like an individual bond, matures and shuts down, allowing investors to treat the securities like individual bonds. That opens the door to strategies like bond laddering or barbells.

The leader in this burgeoning pocket of the bond ETF world remains Guggenheim Investments, which began marketing its BulletShares lineup a number of years ago. Guggenheim has been quite methodical in its introduction of its new BulletShares target-date-maturity bond ETF lineup.

iShares’ lineup, on the other hand, has been a little less clear. The funds, at the outset, didn’t provide exposure to consecutive years, and in some cases there are funds that mature within the same year but in different months.

Filling In Gaps

The pending launches could fill in some of the gaps in the coverage provided by the series and make it easier for investors to use them in laddering strategies.

Currently, there are 17 of the iShares iBonds funds falling into four separate suites: “iBonds Mar Corporate ETFs” (which mature in March of the designated year), “iBonds Dec Corporate ETFs” (which mature in December of the designated year), “iBonds Mar Corporate ex-Financials ETFs” and “iBonds AMT-Free Muni Bond ETFs.”

The seven new funds will be added to the iBonds Dec Corporate ETFs family, which already covers bonds maturing in 2016, 2018 and 2020. The yet-to-be-launched funds will fill in the gaps between those years and extend the suite’s coverage to 2025.

The BulletShares family of corporate bond ETFs already covers every year from 2015 to 2024. However, they also charge more than twice as many basis points with respect to their expense ratios. The BulletShares each come with a fee of 0.24 percent, while the iShares funds charge only 0.10 percent.

The iShares funds ready to launch include the following:

• iShares iBonds Dec 2017 Corporate ETF (IBDJ)
• iShares iBonds Dec 2019 Corporate ETF (IBDK)
• iShares iBonds Dec 2021 Corporate ETF (IBDM)
• iShares iBonds Dec 2022 Corporate ETF (IBDN)
• iShares iBonds Dec 2023 Corporate ETF (IBDO)
• iShares iBonds Dec 2024 Corporate ETF (IBDP)
• iShares iBonds Dec 2025 Corporate ETF (IBDQ)