With the popularity and success of exchange traded funds (ETFs), there are plenty of big names in the investment management world looking to “cash in” on that growth. And that’s certainly evident in this week’s round of new ETF product launches. Both mutual fund giant Legg Mason and financial planner/investment advisory WBI Investments added to their success fund line ups with two new product launches this week. And like their previous efforts, the ETFs are designed to keep their respective clients in-house and away from rivals.
While the launches are completely different in focus – as is the week’s other launch from Ark Investments – they do show just how far the industry has grown.
Legg Mason’s Multi-Themed ETF
Dividends? Check. Low volatility? Check. Currency hedging? Double check. Legg Mason’s new International Low Volatility High Dividend ETF (LVHI ) does it all.
The ETF, which was launched on July 27, is designed to provide investors with a stable source of dividend income from international stocks. LVHI’s index – the QS International Low Volatility High Dividend Hedged Index – uses a series of screens to craft a portfolio of dividend payers that have a high yield, but also have various fundamentals backing up that payout.
LVHI will first run stocks through a profitability screen in order to find firms that have been profitable over the last four quarters, and that have the potential to be profitable over the next four. Essentially, kicking out any distressed firms that are keeping their dividends going. The ETF will then apply a series of volatility screens on its stocks. The ETF, however, not only checks for price volatility but earnings volatility as well. This creates a smooth ride for investors.
Lastly, LVHI hedges its currency exposure to the U.S. dollar to reduce risk.
What investors get from the new ETF is a way to bet on some of the high quality stocks in the international marketplace without the headaches that come with global investing. Ultimately, the new ETF could be a big hit. Perhaps even more so, considering its expense ratio is just 0.40%.
WBI Gets Tactical
On the surface, WBI Investments isn’t exactly a household name. However, it is a pretty big investment advisor. That fact has instantly made it into ETF royalty. When it launched WBI Shares about a year ago, it quickly amassed more than a $1 billion in assets under management. That put it pretty high up the ETF sponsor ladder. WBI hopes to build on that success with its latest launch, the WBI Tactical Rotation Shares (WBIR ).
WBIR is dubbed a “Global Allocation fund.” Basically, that means it can own anything under the sun in terms of assets. From corporate bonds to Malaysian stocks. The new ETF is actively managed and uses a series of priority screens to assess various factors and conditions that affect the potential risk-adjusted returns of the investment opportunities. The fund managers shift around the firm’s assets, as these conditions warrant.
Instead of using individual securities, WBI will use other ETFs in order to accomplish its goals and asset allocation. Current holdings include the Vanguard Telecommunication Services ETF (VOX ), Vanguard Value ETF (VTV ) and Materials Select Sector SPDR (XLB ). WBIR rebalances its holdings quarterly and charges 1.43% in expenses.
Printing a 3D ETF
Finally, this week one of tech’s hottest trends gets its own ETF from Ark Investments. As the name implies, the 3D Printing ETF (PRNT ) will focus on firms in the 3D printing sector.
Like many of its other ETF products, Ark’s PRNT will focus on a high-growth subsector of technology. Estimates for the growth of 3D printing are very high, and the industry is said to have “disruptor” qualities. For longer-term portfolios, that makes it an ideal candidate for investment.
PRNT’s underlying index will focus on the entire spectrum of 3D printing firms, including those that make 3D printing hardware, produce computer-aided design/ printing simulation software, own/operate printing centers, manufacture scanning and measurement devices, or supply 3D printing materials. The ETF and its index will hold both domestic and international stocks.
Expenses for the ETF that launched on July 17 run at 0.66%.
The Bottom Line
This week’s launches continue to expand the number of ETFs available for investors and show just how popular the security type is. With more heavy-weight asset managers getting in on the action, the number of choices will undoubtedly grow even further in the quarters ahead.