Javelin Registers Value-Based ETF

April 16, 2012

Javelin takes another stab at a value-investing ETF.

Javelin Investment Management, a Princeton, N.J.-based investment firm known for its now-defunct ETF focused on Islamic investing, filed paperwork with the U.S. Securities and Exchange Commission to bring to market an ETF that targets fundamentally sound companies that are relatively undervalued by the market.

The new JETS fund marks a re-entry into the ETF market for Javelin, which has had no ETFs on the market since it shut down the JETS Contrarian Opportunities Index Fund (NYSEArca: JCO) last September after it failed to attract assets. The company’s JETS Dow Jones Islamic Market International Index Fund (NYSEArca: JVS) had also suffered the same fate back in 2010.

The proposed JETS DEEP Value Index Fund seems to be an attempt to resurrect JCO’s strategy. The fund, like JCO before it, is designed to track companies that have underperformed in recent years, but that have strong fundamentals relative to other companies.

The ETF will track through representative sampling the Dow Jones Deep Value Index, an equally weighted index that selects only securities that are well traded and accessible to investors. The index uses a smart beta strategy to filter out companies deemed “unacceptable business activities” as well as highly indebted names, according to the filing.

Under normal circumstances, at least 80 percent of the ETF’s assets will be invested in securities included in the underlying index. The remaining 20 percent may be invested in cash, futures contracts, options and swaps that the fund’s advisor believes will help track the underlying index.

Javelin highlighted in the filing that value-focused plays depend on the accuracy of the assessment of a company’s value, something that could put the ETF’s value at risk in the event of a wrong assessment. It also noted that “value stocks” can remain undervalued by the market for long periods of time.

Javelin did not release a ticker or an expense ratio in its prospectus.



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