Political and social issues are showing up more and more in the ETF space.
Socially responsible ETFs still make up a small percentage of the overall fund universe, but ETF providers have been adding products to their rosters to fill the demand in this increasingly popular space. This week, InsightShares joins the fray, debuting a fund that focuses on equality in the workplace.
Here are this week’s new fund launches:
| Ticker | Name | Issuer | Launch Date | ETFdb.com Category | Expense Ratio |
|---|---|---|---|---|---|
| (PRID) | InsightShares LGBT Employment Equality ETF | UBS Global Asset Management | 01/10/2018 | Large Cap Blend Equities | 0.65% |
| (SHYL) | Xtrackers Short Duration High Yield Bond ETF | Deutsche Bank | 01/10/2018 | High Yield Bonds | 0.20% |
| (HYDW) | Xtrackers Low Beta High Yield Bond ETF | Deutsche Bank | 01/11/2018 | High Yield Bonds | 0.25% |
| (HYUP) | Xtrackers High Beta High Yield Bond ETF | Deutsche Bank | 01/11/2018 | High Yield Bonds | 0.35% |
For a list of all new ETF launches, take a look at our ETF Launch Center.
InsightShares Targets LGBT Rights
The InsightShares LGBT Employment Equality ETF (PRID) targets large- and mid-cap companies that promote and provide equality for their lesbian, gay, bisexual and transgender employees. It does this by looking at the Corporate Equality Index (CEI) from the Human Rights Campaign Foundation. This annual survey gives companies a 0-100 rating based on factors such as their non-discriminatory policies and practices, equitable benefits offerings and workplace education. Companies from the eligible universe that meet certain size, liquidity and profitability requirements and score at least an 85 on the CEI survey are included in the index. All qualifying components, nearly 270 in total, are then market-cap weighted to produce the final portfolio.
With so many of the S&P 500’s biggest names making the cut, the Employment Equality ETF ends up looking a lot like an S&P 500 index fund. The fund and the S&P 500 share nine names from their top 10 holdings, and their sector compositions look remarkably similar.
The expense ratio is where the Employment Equality ETF and the S&P 500 part ways. A fund like the Vanguard S&P 500 ETF (VOO ) can be had for just 0.04%, but PRID charges 0.65% annually, more than 16 times as much. If giving up on the socially conscious aspect of PRID isn’t a deal-breaker, investors might be better off sticking with an ultra-low cost S&P 500 fund, given their striking similarities.
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Deutsche Loads up on Junk
Investors exploring the high-yield bond space might find the latest batch of offerings from Deutsche Asset Management intriguing. The Xtrackers Short Duration High Yield Bond ETF (SHYL) is a fairly standard fund in that it targets a basket of junk bonds with durations ranging from 0-5 years. Its fee level, however, sets it apart, as its 0.20% expense ratio immediately makes it one of the cheapest funds in the high-yield group.
The other two new funds – the Xtrackers Low Beta High Yield Bond ETF (HYDW) and the Xtrackers High Beta High Yield Bond ETF (HYUP) – look to split the junk bond universe into two. These two funds are interesting, because, even though they have “beta” in their names, they don’t actually use beta as a selection criteria. The funds, instead, use a bond’s yield to determine its relative risk level. Bonds with yields in the upper half of the eligible universe qualify for the High Beta ETF, while the lower-yielding half qualifies for the Low Beta ETF. Looking at the bond’s yield, for the most part, puts it in the appropriate category, as the funds’ literature puts the beta of the Low Beta ETF at 0.72 and the High Beta ETF at 1.25. It’s worth noting that these two funds divide the universe of bonds for the Xtrackers USD High Yield Corporate Bond ETF (HYLB) – a fund that is designed to measure the entire high-yield bond universe.
The Bottom Line
The Employment Equality ETF is good in concept and fits nicely into the ESG space, but its execution doesn’t really distinguish itself from other broader index funds. Its expense ratio could be a hindrance to its ability to grow. The three high-yield bond ETFs could attract some attention thanks to their expense ratios. Investors have been seeking out the cheapest ETFs for their portfolios, and these will be some of the least expensive funds in the junk bond group.
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