Daily ETF Watch: UBS Debuts 2x REIT ETN

Today UBS rolled out the Etracs Monthly Pay 2xLeveraged MSCI US REIT Index ETN (LRET), which provides 200 percent exposure to the monthly return of the MSCI US REIT Index.

However, in addition to doubling the returns, the note also pays out a monthly coupon that reflects the cash distributions of its index’s components. As with those returns, the coupon essentially doubles the amount of the distributions; according to a UBS fact sheet, as of April 30, the doubled index yield for LRET’s underlying index was 7.45 percent.

The underlying index has 140 constituents, with the largest including Simon Property Group, Public Storage, Health Care REIT, Equity Residential and Ventas Inc. Those five companies represent roughly 23 percent of the total index weight.

The “annual tracking rate” or expense ratio associated with the notes, is 0.85 percent, which is cheaper than the two other ETFs providing leveraged exposure to real estate. The ProShares Ultra Real Estate ETF (URE) comes with an expense ratio of 0.95 percent, while the Direxion Daily Real Estate Bull 3x ETF (DRN), which provides triple exposure to the same index as LRET, charges 0.98 percent.  

Long/Short Debt Fund Plan

ETF Issuer Solutions recently filed for an actively managed long/short fixed-income ETF that will be subadvised by Bramshill ETF Management and target high-yield debt. It would be the first ETF of this nature to list in the U.S.

The AltShares Long/Short High Yield Fund (LSHY) will primarily select its holdings from the components of the Bloomberg USD Corporate High Yield Bond Index, taking long positions in securities that Bramshill thinks will outperform based on its relative value and trend analysis assessments.

It will take short positions in components Bramshill believes will underperform, particularly those that have high default risks. According to the prospectus, accounting irregularities, falling into an overbought sector and weak fundamentals are all reasons Bramshill might adopt a short position in a security.

The overall portfolio will include as many as 200 different securities positions, with an aggregate exposure that can range from -20 percent to 100 percent. Despite its focus on the Bloomberg index, the fund has a sort of “go anywhere” ethos, with no limits placed on its maturity or duration and the freedom to invest in both investment-grade and high-yield debt.

The only notable restriction, which is more of a guideline, is that the fund will “generally” keep positions in individual issuers to 10 percent or less of the portfolio. LSHY’s prospectus also warns that the fund will likely experience higher-than-average turnover due to the nature of its underlying strategy.

The filing did not include an expense ratio, but it did note that the fund would list on the NYSE Arca.

Goldman Updates Filing

Goldman Sachs has recently updated its December 2014 filing for 11 index-based ETFs with tickers and more information on the funds’ underlying indexes.

The smart-beta series of funds marketed under the “ActiveBeta” name will all track in-house benchmarks that are derived from MSCI indexes and provide exposure to four targeted factors: value, momentum, quality and volatility.

Interestingly, the iShares multifactor “FactorSelect” ETFs tracking MSCI indexes seek to capture the quality, value, momentum and size factors, while State Street Global Advisors’ ETFs tied to MSCI Quality Mix indexes take aim at minimum volatility, quality and value. To a lesser degree, ETF Securities has dipped its toe into the equities waters in January by launching two factor-focused funds tracking Edhec Risk’s Scientific Beta indexes and focusing on momentum, volatility, size and value.

It seems that there are multifactor funds cropping up in almost every possible permutation. The Goldman factor-based ETFs and their tickers are as follows:

• Goldman Sachs ActiveBeta International Equity ETF (GSIE)
• Goldman Sachs ActiveBeta Emerging Markets Equity ETF (GEM)
• Goldman Sachs ActiveBeta Europe Equity ETF (GSEU)
• Goldman Sachs ActiveBeta Japan Equity ETF (GSJY)
• Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF (GSLC)
• Goldman Sachs ActiveBeta U.S. Small Cap Equity ETF (GSSC)

Hedge Fund ETFs

It makes sense that Goldman was one of the firms in the running to purchase IndexIQ, given that firm’s lineup of ETFs based on hedge fund strategies. The remainder of the funds Goldman Sachs has in registration includes five ETFs that mimic the returns of hedge fund strategies by investing in other ETFs that capture similar factor exposures as the strategies. Like the ActiveBeta funds, these will also track in-house indexes.

The funds and their tickers are as follows:

• Goldman Sachs Equity Long Short Hedge Fund Tracker ETF (GSLS)
• Goldman Sachs Event Driven Hedge Fund Tracker ETF (GSED)
• Goldman Sachs Macro Hedge Fund Tracker ETF (GSMC)
• Goldman Sachs Multi-Strategy Hedge Fund Tracker ETF (GSMS)
• Goldman Sachs Relative Value Hedge Fund Tracker ETF (GSRV)

No expense ratios were included in the filing, but the funds are slated to list on the NYSE Arca.