AdvisorShares Rolls Out Another Active ETF

by on July 21, 2010 | ETFs Mentioned:

AdvisorShares, the Bethesda, Maryland-based firm that burst on to the ETF scene last year with a fund linked to the investing theories furthered by Harry Dent, continues to expand its presence in the active ETF space. The latest ETF from the firm is the WCM/BNY Mellon Focused Growth ADR ETF (AADR), a fund that seeks long-term capital appreciation above international benchmarks such as the MSCI EAFE Index and the BNY Mellon Classic ADR Index.

AADR will offer investors exposure to a large-cap growth portfolio consisting of non-U.S. stocks. The fund’s assets will generally be concentrated in between 20 and 30 individual securities, with a focus on traditional growth sectors such as technology, health care, and consumer goods/services. At its launch, AADR’s largest holdings consisted of Chinese search engine firm Baidu (5.9%), Walmart de Mexico (5.7%), consumer goods retailer Li & Fung (5.7%), and Israeli drug manufacturer Teva Pharmaceutical (5.1%).

AADR may have appeal as a complementary holding to some of the more popular ETFs offering ex-U.S. exposure. EFA, which tracks the MSCI EAFE Index, maintains significant sector weightings in financials (24%), industrial materials (16%), and energy (7%). Because most ex-U.S. funds are linked to cap-weighted indexes, they tend to have big holdings in banks and oil firms (which tend to be the largest publicly traded companies) and therefore a value bias. AADR will focus primarily on growth companies, potentially offering exposure not sufficiently represented by the most popular international equity ETFs.

AADR will be the first actively-managed ETF to focus primarily on ex-U.S. equities. Grail currently offers a lineup of several active ETFs focusing on various corners of the U.S. market, while other AdvisorShares funds maintain a mix of domestic and international exposure [use the ETF Screener to see a complete list of active ETFs on the market].

AADR will be unique from existing AdvisorShares active ETFs in that its underlying holdings will consist of individual stocks; both DENT and GRV operate as “ETFs of ETFs,” pursuing their respective strategies through positions in other exchange-traded funds. According to the issuer Web site, AADR will target a 15% annual turnover rate, with a 3-5 year nominal holding period. The fund maintains a gross expense ratio of 1.27%, although the advisor has agreed to cap expenses at 1.25% until at least May 2011.

Next up for AdvisorShares looks to be the Peritus High Yield ETF (HYLD), a fund that will invest in high yield debt securities. No launch date for that fund has been set.

Read more about AADR on the fund fact sheet. For updates on all new ETF launches, sign up for our free ETF newsletter.

Disclosure: No positions at time of writing.