Daily ETF Watch: 5 Funds Launch

June 10, 2015

A total of five funds rolled out on Tuesday, including a global spinoff ETF from Van Eck; three currency-hedged ETFs, including two leveraged ones from Direxion and a third focused on Europe from State Street; and, finally, an active tactical equities strategy from Tuttle Tactical Management.

 

The latest launches bring the total for the year to 104 ETFs, up from 86 during the same year-to-date period in 2014.

 

SPUN Takes Off

Van Eck’s Market Vectors arm rolled out a fund targeting spinoffs. The Market Vectors Global Spin-Off ETF (SPUN) targets developed-market equities in Western Europe and Asia, adding to a space that is solely occupied by a fund from Guggenheim that focuses only on U.S. spinoffs.

 

That competing fund is the Guggenheim Spin-Off ETF (CSD | C-58) and it has gathered $542 million since its launch in December 2006. Again, CSD is focused on U.S. spinoffs and the new SPUN casts a wider net, to spinoffs around the developed world.

 

SPUN invests in companies whose stock were automatically distributed to parent-company shareholders. At least 80 percent of the target company must have been distributed to shareholders by its parent company. The idea behind these spinoff funds is for investors to gain access to freshly public entities whose values are being unlocked once they are listed separately.

 

Index Methodology

Market Vectors is known for using its own in-house indexes, but SPUN’s benchmark comes from Horizon Kinetics. As of the end of March, the index had 87 components ranging from $493 million to $93 billion in size, but companies must have a market cap of at least $500 million to be considered for inclusion. The benchmark employs an equal-weighting approach.

 

The prospectus notes that the fund’s holdings can include small- and midcap stocks, foreign stocks and REITs. Individual components can be selected for the index for up to five years from the first index reconstitution following their respective spinoff dates.

 

SPUN comes with an expense ratio of 0.55 percent, or $55 for each $10,000 invested, while CSD costs 66 basis points a year.

 

SSgA Rolls Out Hedged Eurozone SPDR
State Street Global Advisors has joined the currency-hedging trend with the launch of the SPDR Euro Stoxx 50 Currency Hedged ETF (HFEZ). The fund applies a currency hedge to the Euro Stoxx 50 Index, which also underlies the $4.9 billion SPDR Euro Stoxx 50 ETF (FEZ | A-73).

 

The new fund is SSgA’s first foray into the currency-hedged ETF space.

 

HFEZ effects it currency hedge via foreign currency forward contracts. It can also achieve its exposure to the Euro Stoxx 50  Index by purchasing shares of FEZ.

 

While FEZ carries an expense ratio of 0.29 percent, HFEZ charges 0.32 percent.

 

Second Tuttle Fund Launched
Tuttle Tactical Management rolled out its first fund through ETF Issuer Solutions earlier this year, and today it launched its second fund. The Tuttle Tactical Management Multi-Strategy Income ETF (TUTI) is actively managed and comes with an expense ratio of 1.28 percent, according to its prospectus.

 

The fund relies on four different models and can be using one to all of them at any given time. They include the income relative momentum model, dividend countertrend model, dividend tactical fundamental earnings model and dividend absolute momentum model. Although the fund can invest in individual equities and fixed-income securities, it will primarily invest in other income-focused ETFs or ETNs.

 

Tuttle’s first fund, the Tuttle Tactical Management U.S. Core ETF (TUTT) relies on four different momentum strategies. It launched in September and has gathered roughly $51 million in assets.

 

 

Direxion Unveils Hedged Int’l ETFs
Direxion Investments had jumped on the currency-hedged bandwagon with two funds of its own. The Direxion Daily MSCI Europe Currency Hedged Bull 2x Shares (HEGE) and the Direxion Daily MSCI Japan Currency Hedged Bull 2x Shares (HEGJ) provide 2x leveraged exposure to two currency-hedged benchmarks that target key areas for that strategy: Europe and Japan.

 

The $2.5 billion Deutsche X-trackers MSCI Europe Hedged Equity ETF (DBEU | B-64) tracks the same index as HEGE, while the $1.3 billion Deutsche X-trackers MSCI Japan Hedged Equity ETF (DBJP | B-76) tracks the same index as HEGJ.

 

Both funds come with an expense ratio of 1.06 percent.

 

The ETF 50
ETF Labs Trust has filed for a one-of-a-kind fund that will hold other ETFs. The ETF 50 fund will track the ETF Labs/ISE ETF 50 Index.

 

The fund will invest only in ETFs that are listed in the U.S. and have over $100 million in assets under management and a three-month trailing average daily value traded of $1 million. ETNs are not eligible for inclusion.

 

The fund’s index divides its components into equity and nonequity categories, selecting 25 funds from each category. Components are chosen, according to the prospectus, based on a composite ranking that takes into account fees, total returns and volatility. The index’s components are equally weighted during each quarterly review of the index, with an ETF’s individual weighting reset to 20 percent once it reaches 24 percent of the index.

 

While there are other fund-of-funds ETFs, there are none that have anything resembling a similar methodology.

 

ETF Labs Trust is headed by Samuel Masucci, who previously was the CEO of both MacroMarkets and Gencap Ventures. Despite the recent filing, it does not look like ETF Labs has filed an exemptive relief request of its own.

 

The filing did not include a ticker or expense ratio.

 

Active Alts
ETF newcomer Active Alts plans to launch a fund via ETF Issuer Solutions’ (ETFis) exemptive relief.

 

The Active Alts Long/Short U.S. Equity Fund (LGSH), not surprisingly, will be actively managed, with a strategy that looks at fundamentals such as liquidity, balance sheet strength, earnings outlook, industry trends, shareholder yield and trading patterns, among other attributes.

 

The fund will take 20 to 50 long positions in firms with favorable fundamentals that also are not included in the top 10 percent of their size categories in terms of market capitalization. Large-caps are defined as companies with market capitalizations above $5 billion, while midcaps fall into the $1 billion to $5 billion range.

 

Meanwhile, the fund’s short positions will target 20 to 50 companies exhibiting poor fundamentals.

 

LGSH comes with a rather hefty expense ratio of 1.85 percent.

 

The fund’s portfolio manager will be Active Alts founder Brad Lamensdorf. 

 

 

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