U.S. equities got off to a sour start this week, with Monday and Tuesday seeing major indexes end in the red. Stocks finally stabilized on Wednesday, even though economic data came in worse-than-expected: wholesale inventories rose 0.1% in July versus analyst expectations of a 0.5% rise. In corporate news, all eyes were on Apple after the company unveiled its latest models of its iPhone as well as its new iWatch [see also Under the Hood of the Internet ETF (FDN)].
On the ETF front, State Street debuted its first actively managed fund. First Trust also launched an active long-short ETF, while PowerShares introduced its new “laddered” bond fund.
State Street’s new actively managed SPDR SSgA Risk Aware ETF (RORO) aims to provide investors with a way to capitalize on risk-on and risk-off fluctuations in the U.S. equity market, essentially providing competitive returns compared to the broad U.S. equity market and capital appreciation. SSGA employs quant-based strategies, some of which utilize models based on beta, size, credit risk, credit spreads, gold price, U.S. dollar exchange rates and implied volatility, to accomplish this goal.
During periods of anticipated high risk, the portfolio’s composition will be defensive and may increase exposure to large cap and / or value companies. During periods of anticipated low risk, the portfolio’s composition will be risk-seeking and may increase exposure to small cap and/or growth companies. In periods of moderate risk, the portfolio’s composition will more closely reflect the broader U.S. equity market and may have greater exposure to mid-cap companies.
The fund charges an expense ratio of 0.50%, which is relatively low for actively managed ETFs.
A New Long/Short ETF
First Trust’s actively managed Long/Short Equity ETF (FTLS) primary investment objective is to provide investors with long term total return. To obtain this objective, the fund establishes long and short positions in U.S. exchange-listed securities of both domestic and foreign companies, and/or in U.S. ETFs that provide exposure to these securities.
FTLS’s managers will use fundamental, market-related, technical and statistical analysis to profit from both its long and short positions. The fund charges an expense ratio of 0.99%, which is slightly above its category average fee of 0.85%.
Laddered Bond Investing
The new PowerShares LadderRite 0-5 Year Corporate Bond Portfolio (LDRI) tracks the NASDAQ LadderRite 0-5 Year USD Corporate Bond Index, which provides exposure to investment-grade, fixed coupon, USD-denominated bonds issued by companies in the U.S., Canada, Western Europe and Japan.
LDRI uses a laddering methodology that evenly staggers bond maturities so that they occur on regular intervals, which can help mitigate volatility during periods of rising interest rates. Another noteworthy feature of the fund’s underlying index is that it will generally hold bonds to maturity.
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Disclosure: No positions at time of writing.