ETF issuers continue to revamp old themes and step into new territory with their latest fund releases. This week we saw two launches from growth-focused mutual fund house Janus as well as one from fundamental indexing pioneer WisdomTree. Both sets of launches have continued to expand the number of alternatives in investors’ tool boxes.
A Focus on Smaller Stocks From Janus
Since buying VelocityShares over a year ago, Janus has used the firm to launch a multitude of growth focused ETFs, tapping into its expertise in the investment style. This time, the firm has applied its growth knowledge towards small- and mid-cap stocks. Commencing trading on February 23, the firm introduced the Janus Small Cap Growth Alpha ETF (JSML ) and the Janus Small/Mid Cap Growth Alpha ETF (JSMD ).
JSML tracks the Janus Small Cap Growth Alpha Index. The index utilizes a proprietary process based on Janus’ 45-plus years of research into growth stocks. After looking at the broader Russell 2000, the smart-beta index uses screens to find small-cap domestic stocks with great fundamentals in areas such as earnings growth, profitability, and capital efficiency. This takes the broader Russell, and its 2000 or so stocks, down to just 196 different small-cap firms. The ultimate goal of JSML is to find companies poised for sustainable growth over the long haul throughout a variety of market environments.
Like JSML, JSMD uses a similar smart growth index, the Janus Small/Mid Cap Growth Alpha Index, and screen for firms with high and consistent earnings growth and profitability. Janus turns the lens towards SMid-Caps. SMid-cap portfolios blend small- and mid-cap stocks and are often ignored by investors. This sort of overlap, in which some stocks are too big for many small-cap indexes but not large enough for mid-cap indexes, has produced some pretty hefty long-term returns. JSMD taps into the SMid-cap opportunity and represents one of the only ETFs, smart-beta or otherwise, to do so.
Ultimately, the two ETFs provide another way to play smaller domestic stocks in a unique way. JSML and JSMD both charge 0.50% or $50 per $10,000 invested in annual expenses.
A Dose of Alternatives From WisdomTree
Options strategies are often difficult for the average investor to undertake, making these strategies perfect for ETFs. Previously introduced funds like the PowerShares S&P 500 BuyWrite Portfolio (PBP ) have focused on writing covered call strategies. The WisdomTree CBOE S&P 500 PutWrite Strategy Fund (PUTW ) focuses on writing puts. Puts are basically the opposite of call options and give the owner the right to sell a specified number of an underlying security at a specified price within a specified time.
PUTW tracks the CBOE S&P 500 PutWrite Index, which seeks to track the performance of a collateralized put write strategy on the S&P 500 Index. The fund will write at-the-money monthly put options on the index and collect the premiums from doing so. The fund’s only holdings are option contracts on the S&P 500, T-bills and cash used for collateral.
The reason to write puts is that if the S&P 500 falls below the options strike price, the premiums received will help cushion the loss. The fortuitous launch could be just what investors need to survive the current market mayhem.
PUTW charges just 0.38% in expenses. That’s dirt cheap and represents a huge cost savings for investors versus having to write put options themselves.
