USAA Plans To Offer Active ETFs

April 02, 2013

The financial services company joins the ‘long gray line’ to win the right to begin offering ETFs.

USAA, the financial services company set up for U.S. Armed Forces and State Department personnel and their families, filed regulatory paperwork to win the right to market a broad array of actively managed ETFs, the latest firm to take steps to join the rapidly growing ETF industry.

Indeed, the petition seeking “exemptive relief” cast a wide net and was quite detailed for an initial filing, describing no less than 14 funds, many with a focus on fixed income, but also including currently popular strategies, such as funds focused on dividend-rich stocks and natural resources. In sum, the group looks like a thoughtful rendition of core asset classes.

San Antonio, Texas-based USAA, which offers a broad array of proprietary products including mutual funds, insurance and annuities, is getting in what is turning out to be a rather long line of existing funds firms that want to begin offering ETFs. How or when many of these well-known mutual fund companies actually begin launching ETFs isn’t clear, as they do risk cannibalizing their existing products.

The first U.S. ETF was launched in January 1993, and the industry is growing more and more quickly. U.S. ETF assets are now at $1.467 trillion and growing at a record pace.

The filing left open the possibility the funds may at times use derivatives. The company didn’t disclose potential tickers or annual expense ratios for the proposed ETFs.

The 14 funds and their respective aims are as follows:

·

Cornerstone Moderately Aggressive Fund ? will be designed for capital appreciation with a secondary focus on income by investing in about 60 percent stocks and 40 percent bonds

·

Dividend Equity Fund – will invest in dividend-rich stocks, mostly of U.S.-based companies, but up to 20 percent in emerging market firms

·

Flexible Income Fund ?total return through capital appreciation by investing in investment-grade U.S. bonds, high-yield bonds, bank loans, nondollar-denominated bonds, preferred stocks and common stocks

·

Global Managed Volatility Fund ? long-term capital appreciation, while attempting to reduce volatility during unfavorable market conditions, by investing in U.S. and foreign stocks, bonds and a number of alternative investments

·

High Income Fund ? current income and, secondarily, capital appreciation, U.S. dollar-denominated high-yield securities, including bonds (often referred to as “junk” bonds), convertible securities, leveraged loans, or preferred stocks, with an emphasis on noninvestment-grade securities

·

Intermediate Term Bond Fund ? high current income without undue risk to principal by investing in a broad range of debt securities that have a dollar-weighted average portfolio maturity between three to 10 years

·

Precious Metals and Natural Resources Fund ? long-term capital appreciation and protection of purchasing power through investing in U.S. and foreign companies engaged in the exploration, exploitation or processing of gold and other precious metals and natural resources, such as platinum, silver, copper, oil, natural gas and other metals, minerals and energy-related companies

·

Real Return Fund ? exceeds the rate of inflation over an economic cycle by investing in inflation-linked securities and fixed-income securities, including bank loans and non-U.S. dollar instruments, including foreign currencies; equity securities and commodity-linked instruments

·

Short-Term Bond Fund ? preservation of capital by investing in a broad range of investment-grade debt securities that have a dollar-weighted average portfolio maturity of three years or less

·

Tax Exempt Intermediate-Term Fund? interest income that is exempt from federal income tax, primarily through investment-grade securities

·

Tax Exempt Long-Term Fund ? also aimed at federal tax-exempt interest income through investment-grade securities

·

Tax Exempt Short-Term Fund ? also aimed at federal tax-exempt interest income through investment-grade securities

·

Total Return Strategy Fund ? capital appreciation through the use of a dynamic allocation strategy, across stocks, bonds and cash instruments; the fund may also employ an option-based risk management strategy by buying and/or selling options on component indexes or individual securities

·

Ultra Short Term Bond Fund ? high current income consistent with preservation of principal through investing in investment-grade debt securities that have a dollar-weighted average portfolio maturity of 18 months or less

 


 

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