ETF Watch: New Fund-Of-Funds Launches

Today ClearBrook Global Advisors subsidiary ClearShares, in partnership with ETF Series Solutions, rolled out its first ETF, a fund that invests in other registered investment companies, specifically ETFs. The ClearShares OCIO ETF (OCIO) is a play on the “outsourced CIO” concept, and is managed with the intention of outperforming a traditional portfolio that allocates 60% to equities and 40% to fixed income.

OCIO comes with an expense ratio of 0.67% and lists on the NYSE Arca exchange.

A press release from ClearShares notes that the outsourced CIO solution is popular with institutional investors because of the access it offers to investment management talent and asset class exposure. OCIO is designed to combine the “cost-effectiveness, liquidity and transparency of the ETF structure with the experienced professional management, research and analytics of the [outsourced CIO] model,” the release said.

Few Constraints

There is a definite “go anywhere” element to the fund’s methodology, with both top-down and bottom-up analyses figuring into the fund advisor’s investment decisions. OCIO can invest in other actively managed or index-based ETFs and can cover domestic or non-U.S. equity and fixed-income securities.

The prospectus also notes that it can seek exposure to alternative-type investments such as volatility indexes and managed futures via ETFs that do not qualify as traditional regulated investment companies. However, diversification and liquidity are listed as considerations for any investment.

The expectation is that OCIO will invest 40-70% in vehicles providing exposure to equity securities and 20% to 50% in ones providing exposure to debt obligations, the prospectus said. The equity exposures can target specific sectors or geographies and can include master limited partnerships and REITs.

Wide Array of Assets

Similarly, the debt obligations can cover a wide range of asset types, from corporate debt to junk bonds to asset-backed securities. There are no restrictions on currency denomination, maturity or credit quality.

In addition to implementing top-down macroeconomic and bottom-up fundamental analyses, the fund’s manager considers an investment vehicle’s market exposure, liquidity, cost and level of tracking error, the prospectus said.

OCIO will also avoid vehicles that rely on a high degree of leverage or on derivative, inverse exposure, derivatives or illiquid underlying securities. The prospectus notes that no individual vehicle is expected to represent more than 5% of the portfolio.

“We believe the OCIO ETF has the potential to be a total or core portfolio solution for institutional investors, RIAs [registered investment advisors] and individuals, without the resources to achieve 

WisdomTree, Columbia Announce Closures

WisdomTree, the seventh-largest ETF issuer in the U.S., just announced it would be shutting three of its actively managed funds on August 16, the ETFs’ last day of trading.

The WisdomTree Strategic Corporate Bond Fund (CRDT) has about $15 million in assets under management and rolled out in early 2013. The fund targets the global corporate bond space and an intermediate maturity range.

The WisdomTree Western Asset Unconstrained Bond Fund (UBND), a sort of “go anywhere” product, with very few limitations on where it can invest in the fixed-income space, launched in 2015 and has a little more than $5 million in assets under management.

The WisdomTree Global Real Return Fund (RRF) is the smallest of the three ETFs, with just $4 million in AUM. The fund launched in 2011.

WisdomTree has been cleaning house this year. Back in March, the firm shut down seven of its currency-hedged and foreign currency ETFs. With this most recent announced round of closures, it’s on track to shut 10 funds by the end of the calendar year.

Columbia Closing 4 ETFs
Late last week, Columbia also announced it would be shutting down some of its ETFs. These four funds will see their last day of trading on July 21:

• Columbia Intermediate Municipal Bond ETF (GMMB)
• Columbia Core Bond ETF (GMTB)
• Columbia Emerging Markets Core ETF (EMCR)
• Columbia EM Strategic Opportunities ETF (EMDD)

All four funds have less than $8 million in assets under management and were launched in 2012 or earlier.

Another two ETFs recently stopped trading. The US Equity High Volatility Put Write Index Fund (HVPW) had its last day of trading on June 23, while the Dhandho Junoon ETF (JUNE) delisted after the close of trading yesterday.

The total number of fund closures year-to-date stands at 36, but is expected to rise to at least 46 by the end of the summer, based on the number of scheduled shutdowns.

Contact Heather Bell at [email protected].