Daily ETF Watch: S&P Smart Sectors Planned

April 21, 2015

ALPS filed regulatory paperwork detailing ETFs that screen the individual sectors of the S&P 500 for stocks with particular characteristics. The ALPS Sector Leaders ETF and the ALPS Sector Low Volatility ETF will each cover portfolios of 45 stocks that hold five stocks from each of the S&P 500 Index’s nine sectors.

 

The “Leaders” fund will select stocks based on their growth and quality characteristics, while the other fund will select the lowest-volatility stocks from the S&P 500. 

 

ALPS already has a few S&P 500-based ETFs. The ALPS Equal Sector Weight ETF (EQL | C-89) equal-weights the sectors of the S&P 500, holding each of the nine Select Sector ETFs and has about $145 million in assets under management.

 

Meanwhile, the ALPS Sector Dividend Dogs ETF (SDOG | A-66) has a similarly condensed portfolio, selecting the five highest-yielding stocks from each S&P 500 sector. As with the proposed funds, SDOG’s components are equally weighted. The fund has $1.3 billion in assets under management.

 

The filing did not include expense ratios or tickers.

 

Active Small-Cap ETF Debuts
ETF Series Solutions has rolled out the AlphaMark Actively Managed Small Cap ETF (SMCP) on the Nasdaq exchange. The fund uses an active strategy that includes passively managed components.

 

According to the prospectus, manager AlphaMark Advisors will narrow down the universe of U.S.-listed securities—including ADRs, REITs and other ETFs in addition to common and preferred stocks—with market capitalizations under $5 billion based on a bottom-up approach focused on cash flow streams and pricing.

 

From there it will use such measures as return on equity, cash flow and operating margin, as well as reviews of financial statements, enterprise value and management to construct a portfolio of between 25 and 40 stocks.

 

Interestingly, when the fund’s advisor doesn’t think its strategy will beat the overall small-cap market, it has the ability to shift the fund’s entire allocation into index-based small-cap ETFs if it sees fit.

 

The prospectus also notes that the fund can sell securities in cases of changes in the company’s structure or management, changes in the broader economic environment, unacceptable overweights, increases in earnings momentum or extreme overvaluation.

 

SMCP comes with an expense ratio of 0.90 percent.

 

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