Daily ETF Watch: Target Date Funds To Close

Deutsche Bank recently announced that it will be shuttering its family of five target-date ETFs as of May 18, with liquidation set to occur by May 27. The funds, which target 10-year intervals, all have less than $50 million in assets under management:

• Deutsche X-­trackers 2010 Target Date ETF (TDD)
• Deutsche X-­trackers 2020 Target Date ETF (TDH)
• Deutsche X-­trackers 2030 Target Date ETF (TDN)
• Deutsche X-­trackers 2040 Target Date ETF (TDV)
• Deutsche X-­trackers In­Target Date ETF (TDX)

Launched in 2007 by TD Ameritrade using the exemptive relief of the now-defunct firm XShares, they were the first target-date ETFs to launch, and many thought they were the key to paving the way for ETFs to enter the retirement space. However, the poor performance of target-date funds during the financial crisis in 2008-2009 caused target-date funds to fall out of favor, at least in the ETF space.

It should be noted that many hundreds of billions are invested in target-date mutual funds. The concept just never took off with ETFs. iShares shut down its own family of 10 target-date ETFs in August last year.

Hancock Plans Smart-Beta Funds

John Hancock, one of the best-known names in actively managed mutual funds, has filed recently for a family of passively managed ETFs. Interestingly, the four funds will be capitalization-weighted, but their selection methodologies put them firmly in the realm of smart beta—these aren’t at all plain-vanilla products.

John Hancock threw its hat in the ETF ring some time ago by filing for exemptive relief back in 2009, but it has yet to launch a fund. Its initial registration filing was for an actively managed global multi-asset-class fund, but it looks like the firm has rethought that direction.

The four funds outlined in the recent filing include two midcap and two large-cap ETFs. The John Hancock Large Cap ETF and the John Hancock Large Cap Value ETF will each select their components from the largest 750 U.S.-listed stocks.

According to the prospectus, the underlying indexes’ methodology will select components based on what Hancock terms “sources of expected returns,” targeting stocks that have lower relative prices, smaller market capitalizations and higher levels of profitability relative to their peers. The large-cap value fund will also incorporate a screen to select companies with high book values.

Meanwhile, the benchmarks of the John Hancock Mid Cap ETF and John Hancock Mid Cap Value ETF, respectively, will follow similar methodologies, except they will select their holdings from companies falling within the 300th- and 900th-largest U.S.-listed stocks. That indicates that there could be significant overlap between the large-cap and midcap funds, depending on how they are constructed.

The filing did not include any tickers or expense ratios, but the filing indicated the ETFs would list on the NYSE Arca exchange.