For investors and fund wonks, this was a busy week for new exchange traded fund (ETF) launches. There was a total of nine new funds hitting the tape. This bevy of funds covered the gamut from sophisticated volatility strategies to broad indexes covering emerging market bonds. The breadth of product line goes to show how versatile ETFs are in helping investors build their portfolios.
Here are some of the highlights from this week’s round of new ETF launches.
Janus Taps the VIX
People forget that mutual fund powerhouse Janus got into the ETF game by buying volatility-based ETF specialist VelocityShares. The bulk of Janus’s offerings in recent months have been more traditional equity/smart-beta products. The group’s latest three exchange traded notes (ETNs) – which are technically debt securities – go back to using the VelocityShares name and focus on the VIX.
Launched on July 13, the VelocityShares VIX Variable Long/Short ETN (LSVX ), VelocityShares VIX Tail Risk ETN (BSWN ) and VelocityShares VIX Short Volatility Hedged ETN (XIVH ) allow investors to engage in some serious hedging strategies using S&P 500 VIX futures.
All three use a combination of short and long term VIX futures in leveraged and unleveraged positions in order to create a “net” positon that will benefit in certain market environments. For example, LSVX is designed to create a net long position during periods of high volatility and a net short position during periods of low volatility. To do that it has a 33.33% two times leveraged long position and a 66.67% unleveraged short position in the S&P 500 VIX Short-Term Futures Index.
It’s pretty confusing and sophisticated stuff for most investors. However, for options and volatility traders, it could be a much cheaper alternative – even at the ETFs’ 1.30% expense ratio – to execute versus using futures to do the strategies yourself. Additionally, the ETFs make it easy for mom-n-pop investors to add a volatility hedge to their portfolios.
High Momentum & Low Volatility
Invesco, through its successful line of PowerShares ETFs, continues to tap Dorsey, Wright & Associates to develop new innovative ETFs. This time, the momentum pioneers are seeking blend fast moving stocks over slightly less “bouncy” ones.
The PowerShares DWA Momentum & Low Volatility Rotation Portfolio (DWLV ) will focus on global stocks that exhibit low volatility as well as a dash of momentum. The combination of the two strategies should provide exposure to high-flying stocks that have exhibited smaller swings. That should limit drawdowns in falling markets, but still capture any upside.
Like many of Dorsey, Wright’s recent ETFs, DWLV will be a “fund of funds.” The ETF will shift through nine other PowerShares ETFs in order create its portfolio of assets. DWLV will change its portfolio according to market conditions.
The ETF charges just 0.52% (or $52 per $10,000 invested) in expenses.
Getting Some Karma
Also hitting the tape this week is another thematic launch from Global X. The issuer has built a suite of various funds that track new and cutting edge themes from recent weeks. The Global X Conscious Companies ETF (KRMA ) takes a decidedly socially responsible twist with its portfolio.
KRMA will track the Concinnity Conscious Companies Index and is unique in its focus on “stakeholders” when building out its Environmental, Social and Corporate Governance (ESG) portfolio. The fund will rank companies based on a Multi-stakeholder Operating System (MsOS). That metric looks at firms that achieve high outcomes with regards to customers, suppliers, stock & debt holders and local communities, as well as its employees.
The screening process for KRMA is pretty rigorous and stocks that make it into the ETF have made it through a 3-step ESG screen that whittles 1,400 stocks down to just 115.
Expenses for KRMA run at 0.43%.
The Bottom Line
This week’s round of ETF launches truly run the gamut of asset classes and strategies. Ultimately, the launches show just how viable the fund structure is to holding a variety of securities. Time will tell if these launches prove successful. In the meantime, investors have that many more tools to choose from.