After hesitantly creeping along resistance for the entire week in anticipation of GDP data and FOMC commentary, the S&P 500 Index finally managed to peer above the coveted 1,700 mark on Thursday. Amid the ongoing bull run on Wall Street, Tennessee-based newcomer LocalShares is making its first splash in the exchange-traded universe with its launch of the Nashville Area ETF (NASH) on Thursday [see The Complete Visual History Of SPY].
One of the key drivers of growth behind the ETF industry has been the sheer diversity of available offerings; investors both big and small can tap into virtually any asset class around the globe, and even more impressively, there’s usually several products to choose between in the same niche. LocalShares has taken the theme of “targeted” exposure to a whole other level with the launch of the Nashville Area ETF, which is officially the first city-focused fund on the market [Download Free Member Report: How To Pick The Right ETF Every Time].
The premise behind the Nashville ETF may seem outlandish and “too niche,” but it’s really rooted in business fundamentals. Elizabeth Courtney, CEO of LocalShares, notes that the city’s leadership, transit infrastructure, and tax policy are just a few of the noteworthy value-add characteristics that businesses headquartered in Nashville take advantage of. In other words, the premise behind this ETF is that certain regions and communities are more pro-business than others, and Nashville is one of those “hot spots” so to speak [see The Cheapest ETF For Every Investment Objective].
So what is actually included in NASH? The methodology behind this ETF is fairly straightforward; NASH encompasses publicly traded companies that are headquartered in Davidson County, which is the formal government seat in the state, or one of the six bordering counties. Furthermore, the securities must have a minimum market capitalization of $100 million and average daily trade volumes of at least 50,000 shares. Some of the companies included in NASH are:
At inception, all of the component securities are assigned an equal weight, however, factors like growth, liquidity, yield, and ROI will be used to determine rankings and allocations in future quarterly rebalances. From a cost perspective, NASH’s price tag of 0.49% falls in the middle of the cost spectrum for the All Cap Equities ETFdb Category, which features an average expense ratio of 0.47%.
Historically, hyper “geo-targeted” ETFs have not done so well. In 2009, Geary Advisors launched and soon thereafter announced the closure of the first two state-based funds, the Oklahoma ETF (OOK) and the Texas ETF (TXF). Nonetheless, the Nashville Area ETF offers a compelling strategy for those looking to tap into a diverse portfolio of companies situated in a pro-business environment. LocalShares has also hinted that it is interested in developing other city-based ETFs down the road.
Follow me on Twitter @SBojinov
[For more ETF analysis, make sure to sign up for our free ETF newsletter]
Disclosure: No positions at time of writing.