With the fourth quarter commencing, exchange-traded fund (ETF) sponsors have been hard at work launching new products. While the pace of fund launches has slowed as we enter the fourth quarter, the innovation has not. This week featured plenty of never-before-seen funds in passive, smart-beta and active management styles.
|Ticker||Name||Issuer||ETFdb Category||Expense Ratio|
|(RORE)||Lattice Real Estate Strategy ETF||Lattice Strategies||Real Estate||0.45%|
|(FLLV)||Franklin Liberty U.S. Low Volatility ETF||Franklin Templeton||Large-Cap Blend Equities||0.50%|
|(FLCO)||Franklin Liberty Investment Grade Corporate ETF||Franklin Templeton||Corporate Bonds||0.40%|
|(CWS)||AdvisorShares Focused Equity ETF||AdvisorShares||Large-Cap Growth Equities||0.75%|
|(WSKY)||Spirited Funds/ETFMG Whiskey and Spirits ETF||Spirited Funds/ETF Managers Group||Consumer Discretionary Equities||0.75%|
ETF Managers Group Drinks It Up
Through its integrated launch process, ETF Managers Group continues to bring new funds to market on behalf of various managers. This time it partnered with Spirited Funds – a group that specializes in creating various “sin” indexes – to focus on launching the first ETF that tracks the global spirits industry on October 12.
The Spirited Funds/ETFMG Whiskey and Spirits ETF (WSKY) will be all about booze and will track the various global producers of alcohol. This includes distilleries, breweries, vintners and alcohol distributors, as well as firms that produce other alcohol-related paraphernalia. The fund will hold both developed and emerging market stocks.
WSKY’s underlying index – the Spirited Funds/ETFMG Whiskey & Spirits Index – divides its portfolio into “Core” and “Non-Core” stocks. Core holdings include those alcohol manufacturers that physically distill or produce alcohol. These core holdings are weighted at 85% of the index and individually must be at least 4.9% of assets. Non-core stocks include luxury firms that own booze brands or distributors of alcohol/mixers. These firms cannot be more than 4.9% of holdings each. The index includes various liquidity requirements. However, there are no requirements in terms of country weightings or holdings.
The index/ETF will rebalance quarterly and charges 0.75%, or $75 per $10,000 invested in expenses.
AdvisorShares Crosses Wall Street
In reading Eddy Elfenbein’s Twitter bio, you might get the impression that he’s some “hot-shot” know-it-all trader. However, if you dig deeper into his Crossing Wall Street blog, you’ll realize that he’s one of the more commonsense bloggers out there. Elfenbein’s focus tends to be on buy-n-hold and long-term investing.
The crux of his blog is his famous “Buy List.” The Buy List consists of 20 stocks selected at the start of each year. These stocks are locked and sealed, and no changes can be made throughout the year. Each year, only five stocks are replaced. The list’s returns have been quite good and now investors are able to buy that list as an ETF.
The AdvisorShares Focused Equity ETF (CWS) tracks Elfenbein’s strategy and will own the 20 stocks on the Buy List. The ETF is actively managed by the blogger. Elfenbein uses a variety of screens in order to find stocks with high earnings quality, as well as a history of sales/earnings growth and dividend increases. Basically, CWS can be considered a GARP (growth at a reasonable price) fund. Given Elfenbein’s history of outperformance on the blog, CWS should be a great performer over the long term.
Expenses for the ETF run at 0.75%.
Franklin Templeton Gets Active
Like many mutual fund powerhouses, rather than run away from ETFs, Franklin Templeton has embraced them by launching many smart-beta funds and a series of active ETFs. The end of the third quarter/beginning of the fourth quarter, Franklin added two more active ETFs to its list – the Franklin Liberty Investment Grade Corporate ETF (FLCO) and Franklin Liberty U.S. Low Volatility ETF (FLLV).
FLCO is designed for investors seeking income. The fund will bet on investment grade corporate bonds. However, the fund is considered a go-anywhere ETF, and can bet on any maturity/duration level, as well as any nation. This includes domestic bonds, as well as those of foreign agencies and corporations holding non-U.S. dollar denominated securities. The idea is to craft a portfolio that provides the highest level of income for the current market environment. environment.
FLLV will seek to capitalize on the low-volatility phenomenon or stocks that “jump” less than the broader market. The ETFs manager will screen the broader U.S.-based Russell 1000 Index and look for those firms that exhibit strong fundamental characteristics and have the lowest realized volatility scores using a proprietary quantitative model.
FLLV will charge 0.50%, while FLCO will charge 0.40% in expenses.
Smart-Beta Real Estate
Investors looking for smart-beta exposure can finally add real estate to their portfolios. The Hartford Fund’s sponsored Lattice Real Estate Strategy ETF (RORE) uses a multi-factor approach to screening across quality, momentum and value. The idea is to create a competitive yield and improve return potential in U.S. REITs
Using the screening process, RORE’s index – the Lattice Risk-Optimized Real Estate Strategy Index tends to focus more on small- to mid-size REITs and has a more balanced approach to property types. This focus helps it outperform more standard REIT indexes during back tests.
Expenses run at just 0.45%.
The Bottom Line
Heading into the last quarter of the year, ETF sponsors continue to unveil new products that tap into new markets and strategies. The latest batch of ETFs is a testament to that innovation.