Renaissance Launches International IPO ETF (IPOS)

by on October 9, 2014 | ETFs Mentioned:

This week, Wall Street got off to yet another sour start, with major equity indexes closing in the red. On Wednesday, stocks took a small breather after two straight down days. The third quarter earnings season also kicked off this week, with aluminum producer and bellwether Alcoa (AA) posting its results on Wednesday after the closing bell [see also Under the Hood of the Internet ETF (FDN)].

Also this week, Renaissance Capital, the creator of the IPO ETF (IPO), launched its second ETF.

The International IPO ETFFlag

Last year, Renaissance Capital introduced its first exchange traded product, the IPO ETF (IPO), which thus far has accumulated over $30 million in total assets under management. On Monday, the issuer’s newest ETF–the International IPO ETF (IPOS)–made its debut.

Commenting on the launch of the new fund, Chairman of Renaissance Capital Kathleen Smith stated “The launch of the Renaissance International IPO ETF, responds to investor demand for systematic exposure to newly listed IPOs in a low-cost tax- efficient exchange-traded structure. When added to core equity holdings, this portfolio of new equities provides investors with unique returns and more complete coverage of the full set of public equities. The Renaissance International IPO ETF when coupled with the Renaissance IPO ETF (IPO) provides investors with access to the entire global IPO market.”

The fund tracks the Renaissance International IPO Index, which is a stock market index based upon a portfolio of non U.S.-listed newly public companies, prior to their inclusion in global core equity portfolios. The index reflects approximately the top 80% of newly public companies in capitalization terms, is weighted by float capitalization, and imposes a 10% cap on large constituents. Sizable IPOs are added at the end of their fifth trading day and the rest are added during scheduled quarterly reviews. Companies are removed two years after their initial trade date, when they become seasoned equities.

Under the Hood of IPOS

Currently, IPOS’s portfolio features roughly 100 individual holdings. The top five companies include BB Seguridade Participacoes, Direct Line Insurance Group, Altice, Suntory Beverage + Food, and Royal Mail. Roughly 20% of total assets are allocated to stocks from the U.K., while approximately 30% is allocated to equities from China, Japan, and Germany. IPOS also features exposure to IPOs from France, Poland, Brazil, Mexico, and Italy.

From a sector perspective, approximately 40% of the portfolio is financial equities. Industrials and consumer goods and services are also given hefty allocations. Other sectors represented in this fund include telecoms, technology, health care, oil & gas, utilities, and basic materials. 

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Disclosure: No positions at time of writing.