ETF Watch: First Trust Debuts Volatility Funds

First Trust rolls out two active ‘managed volatility’ ETFs.

ETF.com
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Reviewed by: etf.com Staff
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Edited by: etf.com Staff

Today First Trust launched two actively managed ETFs on the NYSE Arca exchange that seek to generate capital appreciation while keeping a lid on volatility. The First Trust Horizon Managed Volatility Developed International ETF (HDMV) and the First Trust Horizon Managed Volatility Domestic ETF (HUSV) are both subadvised by Horizon Investments and come with expense ratios of 0.80% and 0.70%, respectively.

Both funds will use a quantitative and rules-based approach to select and weight stocks based on their future expected volatility. However, HDMV selects its 100-200 holdings from 20 developed markets, including the U.S., while HUSV’s portfolio includes 50-75 companies solely from the U.S. 

New Brand To Promote ‘SerenityShares’

In a recent filing, a firm called SerenityShares has outlined plans to launch three funds. The ETFs will involve sector strategies.

The SerenityShares Core U.S. ETF will track the SPADE Core U.S. Index, which covers other U.S.-listed ETFs. The index selects the top four ETFs from each of 20 identified sectors based on technical analysis that takes into account current and historical prices, moving averages, volume, the market cycle and the ETF’s likelihood of positive performance over the next quarter, according to the prospectus. The technical analysis is also used to establish a weighting for the ETF within its sector.

The SerenityShares Core Multi-Asset ETF will use the same fund-of-funds sector strategy, but 30% of the total weight of the index will comprise ETFs representing roughly 25 other asset classes, ranging from China equities to senior loans to precious metals. The different-asset-class ETFs are subjected to similar technical analysis as the sector ETFs.

The SerenityShares Impact ETF heads in a totally different direction, addressing environmental, social and governance (ESG) issues. The index components are U.S.-listed companies and are selected based on how much of their revenues come from business activities relating to some 20 ESG themes falling into five “pillar” categories: environmental stewardship, resourse scarcity, societal, healthy lifestyle, new initiatives and empowerment.

The index also screens out companies that are heavily involved in the tobacco, alcohol, fossil fuels, firearms and military weapons industries. Individual company weights are capped at 3.5% during the rebalancings, while each theme is capped at 20% of the index. The index will typically include 75 to 100 components.

The filing did not include tickers or expense ratios, but it did indicate that the funds would list on the NYSE Arca exchange. SerenityShares Investments is listed as the advisor, while Vident Investment Advisory is listed as the subadvisor.

Contact Heather Bell at [email protected].

 

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