New Alpha Architect ETF AAUS Launches With $445M Assets
- The Alpha Architect U.S. Equity ETF (AAUS) debuts with $445 million via a syndicated 351 exchange.
- The fund seeks core U.S. equity exposure while avoiding certain dividend stocks at times.
- The new ETF charges a 0.15% expense ratio, below the category median.
Alpha Architect launched the Alpha Architect U.S. Equity ETF (AAUS) with $445 million in assets under management, using a syndicated Section 351 exchange structure that allowed multiple investors to contribute securities directly to seed the new fund.
The exchange-traded fund began trading Tuesday and seeks to provide core U.S. equity exposure while strategically avoiding certain dividend-paying stocks, according to a press release from the Philadelphia-based investment firm.
"351 syndication is a great tool to minimize the financial risk of launching an ETF," Wes Gray, co-chief investment officer of Alpha Architect, said in the press release. "The ability to achieve economic scale in an ETF, pre-launch, dramatically lowers the risk of an ETF having to shut its doors down the road, which is terrible for shareholders."
The fund charges a 0.15% expense ratio, below the category median for large-cap equity funds, according to Alpha Architect. The ETF consolidates multiple securities into one vehicle while maintaining exposure to large-capitalization U.S. companies.
AAUS Strategy Targets Dividend Timing
The strategy involves two components, according to the filing: First, broad U.S. equity market exposure similar to market-cap weighted index funds and, second, avoiding certain dividend-paying stocks around ex-dividend dates based on academic research findings.
The fund's dividend avoidance strategy stems from research suggesting demand for dividend-paying stocks before distribution dates drives prices above fundamental values, according to the prospectus. Alpha Architect will monitor portfolio holdings and may sell positions before dividend record dates, then repurchase shares approximately 30 to 60 days after distributions.
"Academic research shows that investors, at times, overvalue dividend stocks before they go ex-dividend," Jack Vogel, co-chief investment officer of Alpha Architect, said in the press release. "The research finds that these firms have abnormal returns before the ex-date, with reversals thereafter."
The syndicated 351 exchange structure allowed individuals and financial advisors' clients to contribute appreciated securities to seed the ETF while potentially deferring capital gains taxes, according to the press release. This differs from traditional ETF launches that start with minimal assets.
