IndexIQ Plans 2 Equity ETFs
Proposed smart-beta funds target U.S. and non-U.S. developed markets.
IndexIQ has filed for two ETFs that implement a smart-beta methodology. The IQ 500 International ETF and the IQ 500 ETF invest in equities from 23 non-U.S. developed markets and from the U.S., respectively.
The international fund has minimum liquidity requirements of an average daily 52-week trade volume of $5 million and 100,000 shares, while also requiring market capitalization of at least $1 billion. Eligible companies must have been trading for at least two quarters to be considered for inclusion.
The U.S. fund has similar parameters in terms of liquidity and market capitalization, but requires just an average daily 52-week volume of 75,000 shares.
For both indexes, the companies are ranked based on sales and market share within their sector peer groups and on three-year average marketing share relative to the rest of the universe. A composite score is assigned to each company, with the top 500 selected for inclusion, and weighted using those scores. Components are limited to an individual weighting of 5% on an annual basis and a weighting of 10% during the annual rebalance, according to the prospectus.
The document also warns that investors in both of the funds should be comfortable with high levels of volatility and potentially steep drawdowns.
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