A Key Filing & A Possible Return

June 29, 2020

News broke Friday that Dimensional Fund Advisors filed to launch its own actively managed ETFs. In addition, Volatility Shares has made moves to launch a product similar to one of the ETNs that VelocityShares is delisting.

Jumping Into ETF Issuer Pool

Many could say that it was only a matter of time before DFA rolled out its own products in the ETF market. The firm has always been held in high regard by the index fund community, because while it promotes active strategies, it is very compatible with the index-based philosophy in that they hold large swaths of the market with minimal turnover.

DFA is widely considered to be a pioneer in the factor investing space, and counts founder and CEO David Booth (namesake of the University of Chicago Booth School of Business) on its board of directors as well as Eugene Fama and Kenneth French.

 The three proposed ETFs are as follows:

‘Size, Value And/Or Profitability’

The filing lacks tickers and expense ratios, but does describe the strategies that will be followed by the three funds. Stocks will be selected for each portfolio based mainly on “size, value, and/or profitability” relative to other securities in the designated universe.

The prospectus also mentions that securities can be excluded from consideration if they are unduly affected by an environmental, social or governance issues relative to their peers.

There is no indication in the filing whether the firm will be using one of the five new active management models approved by the SEC.

The move is also surprising given that John Hancock’s 15 ETFs—with more than $4 billion in assets under management—are all subadvised by DFA, and their underlying indexes are co-branded with DFA and based on DFA’s investment principles.

John Hancock said in a statement that it remained committed to its ETF lineup and that it will be unaffected by DFA’s new venture.

VelocityShares ETNs Return

VelocityShares recently announced the imminent delisting of $2 billion worth of its most popular ETNs. (Read: Popular ETNs Delisting In July)

However, Bloomberg reported that Volatility Shares recently requested to list an ETF very similar to the VelocityShares Daily 2x VIX Short-Term ETN (TVIX) with Cboe Global Markets, parent company of ETF.com. TVIX is the largest of the ETNs to be delisted, with roughly $1.5 billion in assets at the time of the delisting announcement. The new ETF would have the same objective as TVIX, to return two times the daily performance of futures contracts on the Cboe Volatility Index (VIX). 

Contact Heather Bell at [email protected]

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