Renaissance IPO ETF (IPO | F-32) AUM: $26M; YTD returns: 0.6 percent
IPO tracks a market-cap-weighted index of recent U.S.-listed IPOs. The fund acquires new issues within 90 days or sooner after IPO, and sells after two years.
Its direct rival, the First Trust US IPO (FPX | F-48), holds stocks for four years, which explains Tesla’s presence in FPX and absence in IPO. Concentration in single names like Twitter, IPO’s largest holding, looms larger here, for better or worse.
Investors who want a newly listed stock should just buy the stock, but for those who want systematic exposure to new listings, then an ETF like IPO (or FPX) fits the bill. IPO charges a competitive expense ratio of 0.60 percent, or $60 for every $10,000 invested.
First Trust US IPO (FPX | F-48) AUM: $478M; YTD returns: 3.8 percent
Charts courtesy of StockCharts.com
FPX tracks a market-cap-weighted index of the 100 largest U.S. IPOs over the first 1,000 trading days of each stock. Stocks must pass additional quantitative screens to make it into the index.
FPX tries to deliver outperformance by holding stock in firms that had their IPO within the last four years. Specifically, the fund's index selects the largest and most liquid of these companies, with exposure to any one firm capped at 10 percent.
By rule, companies drop out of the fund’s index four years after their inclusion at a date closest to the index’s rebalancing date. Facebook is currently the fund’s biggest holding.