This week, the ETF Industry welcomed two new funds from UBS, both of which offer exposure to homebuilders equities. Direxion also introduced three “Value Line” products, while newcomer CSOP launched its first U.S.-listed ETF.
Pure Play on Homebuilders
On Tuesday, UBS launched two ETFs that take a “pure play” approach to homebuilders equities. Both the ETRACS ISE Exclusively Homebuilders ETN (HOMX ) and the ETRACS Monthly Reset 2xLeveraged ISE Exclusively Homebuilders ETN (HOML ) tracks the same underlying index, with HOML offering 200% exposure.
The ISE Exclusively Homebuilders Total Return Index focuses solely on companies that engage in the development and construction of homes and communities, providing direct exposure to homebuilders. The Index attempts to capture at least two-thirds of the homebuilder industry’s market capitalization. The index utilizes a “modified” market capitalization-weighted methodology, which prevents a few large securities from dominating the Index and distorting an Index return that is representative of an industry sector.
HOMX and HOML offers exposure to roughly 25 individual securities, all of which are U.S.-listed companies. Currently, its top five holdings (and allocations) include:
- Lennar CP (LEN) – 10.7%
- D R Horton Inc (DHI) – 10.1%
- Toll Brothers Inc (TOL) – 8.8%
- PULTE HOMES Inc (PHM) – 7.8%
- Meritage Homes Corp (MTH) – 5.4%
Together these companies account for roughly 40% of the portfolio. It should be noted that any cash dividends on the index constituents are reinvested in the index and are reflected in the index level. HOMX charges an expense ratio of 0.40%, while HOML charges 0.85%.
Direxion's Value Line Funds
On Wednesday, Direxion introduced three new “Value Line” Funds:
- Value Line Small- and Mid-Cap High Dividend ETF (VLSM )
- Value Line Mid- and Large-Cap High Dividend ETF (VLML )
- Value Line Conservative Equity ETF (VLLV )
Each of these funds utilizes indexes from Value Line, an independent investment research firm, best known for publishing “The Value Line Investment Survey,” which utilizes proprietary quantitative ranking systems to rate stocks.
VLSM and VLML track indexes comprised of 50 small and mid cap and 50 mid and large cap companies, respectively. Securities are selected using Value Line’s Timeliness, Performance, and Safety Ranks, and the Financial Strength Rating. The indexes are modified equal-dollar weighted indexes comprised of U.S. exchange-listed securities of companies that pay above average dividends. Constituents are reviewed weekly by Value Line and a stock will be replaced if its Timeliness or Safety Ranks or the Financial Strength Rating falls significantly.
VLLV’s underlying index focuses on Value Line’s proprietary Safety Rank, which measures the total risk of a stock and its defensive capability during an overall equity market downturn relative to the other stocks in the Value Line universe. Like the other funds, VLLV’s index is reviewed weekly.
Each fund charges an expense ratio of 0.58%.
CSOP Makes U.S. Debut
Today, CSOP Asset Management launched the FTSE China A50 ETF (AFTY ), making it the first ETF to be listed independently in the U.S. by a Chinese asset management company. The fund tracks an index that holds the 50 largest companies based on total market cap on the Shanghai and Shenzhen Exchanges, which are representative of the largest leaders within each sector. AFTY charges an expense ratio of 0.99%.
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Disclosure: No positions at time of writing.
