After Drought, A Deluge Of ETF Launches

June 25, 2020

Today may mark a turning point for the ETF space after the onset of the coronavirus pandemic. ETF launches have been fairly thin on the ground since March, though not catastrophically so. Today, however, is the largest launch day of the year since iShares rolled out its iBonds Treasury family of nine ETFs at the end of February.

Eight new funds from four different issuers made their debut this morning, including four from Pacer and two from the new brand Agility Shares, which is affiliated with advisory firm Toews Corp.

Pacer BioThreat ETF

Pacer’s rollout includes one thematic ETF and three risk management strategies similar to their TrendPilot lineup.

Despite its timeliness, the Pacer BioThreat Strategy ETF (VIRS) is actually an ETF that Pacer had been looking at launching years before the pandemic hit, only to return to the idea more recently. The fund tracks the LifeSci BioThreat Strategy Index.

VIRS comes with an expense ratio of 0.70% and lists on Cboe Global Markets, the parent company of ETF.com.

Unlike the recently launched and COVID-inspired ETFMG Treatments, Testing and Advancements ETF (GERM), VIRS does not focus solely on firms involved in the development and marketing of vaccines and treatments for infectious diseases. Instead it takes a broad perspective on the concept of biological threats to human health and the companies that provide products and services that help people detect, respond to, adapt to, recover from and survive biological threats whether they are manmade or natural, according to the prospectus.

“It’s much more comprehensive. The obvious themes for a pandemic are going to be your pharma and biotech solutions, whether its protocol or therapeutic or vaccines,” Sean O’Hara, president of Pacer ETFs, said of VIRS.

“My premise is that we got caught flat-footed by a lot of this. I don’t think we’re going to go back to that—I think we’re going to be a lot more proactive,” he added, noting that the fund was designed to take into account struggles that had to be addressed during the pandemic, like shortages with regard to testing, detection and personal protective equipment.

At the end of May, the index had 45 components, including large allocations to health care and industrial stocks.

Partnership With Lunt Capital

The other three ETFs launched by Pacer today all track indexes provided by Lunt Capital Management. They each have an expense ratio of 0.60% and list on the NYSE Arca exchange. The trio includes the following:

Each relies on Lunt Capital Management’s proprietary relative strength methodology to allocate between different indexes. In the case of ALTL, the fund shifts its allocation between the S&P 500 Low Volatility Index and the S&P 500 High Beta Index based on a monthly relative strength evaluation, the prospectus says.

Meanwhile, PAMC and PALC are tied to the S&P 500 and S&P Midcap 400 indexes, respectively, in that they allocate to subindexes of these two parent indexes that highlight the securities in each that have the most and least exposure to the momentum, quality, value and low volatility factors. On a monthly basis, the two subindexes demonstrating the highest degree of relative strength are selected to allocate to, unless they both represent exposure to the same factor, in which case, the index with the third-highest degree of relative strength is selected.   

Direxion Captures A New Trend
Like Pacer’s VIRS, the Direxion Work From Home ETF (WFH) seeks to capitalize on the changes that have occurred since the start of the most recent pandemic. The ETF comes with an expense ratio of 0.45% and lists on the NYSE Arca.

“The ETF is designed to offer exposure to firms that are really at the intersection of this worldwide transformation to the greater acceptance and requirement of remote work,” said David Mazza, Direxion’s head of product.

WFH’s underlying index includes 40 companies selected from four categories of products and services that enable working from home: remote communications, cybersecurity, online project and document management, and cloud computing technologies.

Mazza notes that in 2017, about 5% of Americans worked from home, but the pandemic has accelerated that trend.  

“I believe firmly that absent a miracle vaccine, we will find ourselves in a new normal, and that new normal will have elements of employees working in offices and also spending some time at home,” he said.

Companies are evaluated using the index provider’s proprietary natural language processing algorithm, ARTIS, such that the top 10 companies for each of the four categories are selected for inclusion in the index, the prospectus says.

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