ETF Watch: Actively Managed Income Fund Launches

Today a newcomer to the ETF space, StrongVest, is launching an actively managed ETF carrying the brand name of another firm, CWA Asset Management Group. The CWA Income ETF (CWAI) is primarily concerned with generating total return, and comes with an expense ratio of 0.75%.

The fund is listed on the Bats exchange, which is owned by ETF.com's parent company, CBOE.

The fund’s subadvisor will take a value-based approach, focusing on current and expected valuations, credit quality, balance sheet stability and competitive advantages, the prospectus said.

Typical Holdings

CWAI typically holds a portfolio that includes corporate bonds from domestic, large-cap issuers and equities. In terms of the fixed-income holdings, they tend to have varying maturities, and although they are primarily from large-cap U.S. issuers, they can include foreign issuers and be of any size, sector and credit quality, according to the prospectus.

The portfolio’s equity holdings tend to have high dividend yields and can be drawn from any size segment. They can include common and preferred stocks, warrants, convertible securities and ETFs or similar investment vehicles. The equity bucket is limited to a 20% weight within the fund.

The prospectus further noted that CWAI’s portfolio had no requirements regarding the currency denomination of its holdings.

Direxion Adds Commodity Futures Fund

Direxion is getting into the commodity space with today’s launch of a fund that will seek to outperform the Auspice Broad Commodity Index. The Direxion Auspice Broad Commodity Strategy ETF (COM) will invest up to 25% of its assets in a futures portfolio through a subsidiary domiciled in the Cayman Islands, while the rest of the fund will be placed in an actively managed portfolio of high-quality short-term debt, such as Treasury bills. It is expected that any return in excess of the Auspice index will be generated via the fixed-income portfolio.

COM has an expense ratio of 0.70% and is listed on the NYSE Arca exchange.

Although the fund is not required to track its benchmark and is technically actively managed, the Auspice index will no doubt influence the futures portion of the fund. The index tracks 12 commodity futures contracts and determines their position sizes based on their historical volatility. The methodology uses each futures contract’s prevailing price trend to determine if the portfolio will hold a long or flat position.

As of the end of 2016, the index included exposure to six of 12 commodities: cotton, crude oil, natural gas, gasoline, heating oil and copper. The other commodities that the index could include are soybeans, corn, wheat, sugar, gold and silver.

Contact Heather Bell at [email protected].