San Diego Firm ERNY Seeks To Offer ETFs

April 08, 2013

A San Diego firm looks to offer active and passive ETFs, with a focus on dividend-based strategies.

ERNY Financial Advisors, a San Diego-based firm, has submitted two exemptive relief filings to the Securities and Exchange Commission. It is seeking to enter the U.S. ETF market with actively managed ETFs as well as index-based funds, including self-indexed strategies.

The ERNY Large Capitalization Dividend ETF is the first fund the company detailed in a filing requesting regulatory permission to offer actively managed strategies.

The planned ETF would seek long-term capital appreciation and income through a basket of equities, but would also tap into derivatives such as futures and options, as well as a mix of long and short exposure in order to achieve its goal, the filing said.

In a separate request, ERNY also petitioned for permission to market index-based strategies that might be self-indexed, looking to “establish certain index-based market basket investment products intended to be made available to both institutional and retail investors,” it said in the filing.

The company said its first index fund would be called the ERNY Large Capitalization Dividend Index ETF, and would be based on an index it created called the ERNY Large Capitalization Dividend Index.

ERNY Financial, headed by certified financial planner and founder Eric Ervin, is a firm focused on corporate fundamental research, providing in-depth analytics of how companies perform, according to its website. The firm is the latest newcomer to look for an entry point into the quickly growing U.S. ETF market now boasting more than $1.4 trillion in assets.

Dividend-focused ETFs are certainly a good bet as they continue to gather assets at a time when dividend-paying stocks are meeting investors’ demand for income, as yields in the fixed-income space remain paltry at best.

But carving out a niche that sticks can prove tricky in a market that has some 90 percent of its total assets tied to a handful of fund sponsors. USAA, Guinness Atkinson and Franklin Templeton are some of the other new players looking for a turn in the ETF market.

ERNY’s index-based strategies will also make use of derivatives, the company said in the filing.

Exemptive relief grants ETF firms exceptions to sections of the Investment Act of 1940 and is the first step in the path to launching ETFs. It often takes at least six to 12 months from the date of the initial filing for a company’s first ETF to hit the market.



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