Renaissance Capital Launches IPO ETF (IPO)

by on October 17, 2013 | ETFs Mentioned:

In true Washington D.C. fashion, politicians managed to strike a deal less than 24 hours before the looming debt-ceiling deadline. Stocks opened higher yesterday so news of the government reopening mid-day failed to deliver the stellar boost that many had hoped for in light of the clouds of uncertainty scattering. Amid the return of optimism to Wall Street, newcomer Renaissance made its splash onto the scene with its launch of the IPO ETF [see also 3 Buy-And-Hold Sectors For The Mid-Cycle Expansion]. 

Renaissance IPO ETF (IPO): Capture New Opportunities with a Wide Net

The new ETF is linked to the Renaissance IPO Index, which is a benchmark designed to hold the largest, most liquid newly listed domestic IPOs. The underlying benchmark is dynamic in nature; IPO is expected to include new companies on the fifth day of trading, or upon quarterly review. Furthermore, the entire basket of holdings is rebalanced regularly as the index removes securities after they have been publicly traded for two years [see ETF Launch Center].

Renaissance Capital is well versed when it comes to new public offerings as the company boasts a reputation as a global IPO investment advisor; the firm is responsible for managing the Global IPO Plus Aftermarket Fund (IPOSX) as well as separately managed institutional accounts [see also 101 ETF Lessons Every Financial Advisor Should Learn].

The IPO ETF is designed to offer investors a broad-based approach for accessing the newest companies well before they would be eligible for inclusion in funds linked to more traditional, passive “core” equity indexes. As of September 30, 2013, IPO’s benchmark included significant exposure to:

  • Facebook (FB)
  • Michael Kors Holdings (KORS)
  • Workday (WDAY)

Meet The Competition

The new IPO ETF charges 0.60% in expense fees, placing it in the “expensive” end of the cost spectrum among offerings in the All Cap Equities ETFdb Category. However, given the fund’s niche strategy, it really has one direct competitor at the moment: the First Trust IPOX-100 Index Fund (FPX, C). By comparison, the First Trust offering charges the same expense ratio and has managed to accumulate over $180 million in assets under management since launching in April of 2006.

The Renaissance IPO ETF warrants a closer look from anyone looking to gain broad exposure to the newest companies hitting the stock market, but are wary of doing so on a stock-by-stock basis.

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Disclosure: No positions at time of writing.