ETF Week: Large Cap Value Fund Debuts

October 26, 2018

This week was a quiet one, with only one launch from a new entrant into the ETF space. Below is a roundup of the key events in the ETF space during the week of Oct. 22:

Distillate Capital Enters ETF Fold

Chicago-based Distillate Capital launched its first ETF this week, a U.S. large-cap value ETF that relies on the company’s take on value and quality metrics. The Distillate U.S. Fundamental Stability & Value ETF (DSTL), which came to market through ETF Series Solutions, an ETF trust associated with U.S. Bancorp, tracks a proprietary index that picks companies based on three fundamental measures of value: financial indebtedness, fundamental stability and valuation.

DSTL is listed on NYSE Arca and costs 0.39% in expense ratio, or $39 per $10,000 invested.

3 New Kensho ETFs

Also this week, State Street Global Advisors launched three new AI-driven thematic ETFs: the SPDR Kensho Clean Power ETF (XKCP), the SPDR Kensho Final Frontiers ETF (XKFF) and the SPDR Kensho New Economies Composite ETF (KOMP). These three ETFs join the company's existing Kensho suite, which includes the SPDR Kensho Intelligent Structure ETF (XKII), the SPDR Kensho Future Security ETF (XKFS) and the SPDR Kensho Smart Mobility ETF (XKST).

Kensho Indices use a proprietary natural language processing platform to scan annual reports filed with the SEC and other public data to identify companies involved in one of 11 sectors of a so-called new economy, as well as the extent to which each company is involved. Additional liquidity and listings criteria are applied, then the resultant basket of eligible securities is reviewed by the index committee.

“Today’s technological innovations are not only changing the way we live and work, but are creating actionable growth opportunities for investors, much like how the rise of personal computers spawned a new era of disruption,” said Noel Archard, global head of SPDRs, in a release. “With the addition of KOMP, XKCP and XKFF to SPDR’s suite of sector and industry ETFs, investors can access the potential for dynamic growth and economic disruption across infrastructure, transportation, cybersecurity, defense, energy, space exploration and more, all in a single trade.”

More AI-Based Thematic ETFs Enter Pipeline

Global X proposed an e-commerce ETF that would rely on artificial intelligence for stock selection. The Global X E-commerce ETF, which would track the Solactive E-commerce Index, provides exposure to global companies "positioned to benefit from the increased adoption of e-commerce as a distribution model," according to the prospectus.

WisdomTree Makes 2 Passive ETFs Active

WisdomTree converted two of its emerging market smart-beta ETFs from passive indexes to active management. The WisdomTree Emerging Markets Consumer Growth Fund (EMCG) and the WisdomTree Emerging Markets Dividend Growth Fund (DGRE) will now be actively managed. However, the funds' names, tickers and expense ratios will remain unchanged. Currently, EMCG and DGRE both charge 0.32%, making them among the cheaper emerging markets and smart-beta ETF options.

Contact Cinthia Murphy at [email protected]

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