Today’s new ETF listings from around the world.
New not-for-profit issuer Impact Shares has listed two ETFs backed by charity groups the National Association for the Advancement of Colored People and the YWCA Metropolitan Chicago. The stated aim of these ETFs is to provide a fundraising arm for the YWCA and the NAACP. The funds do this by using the gains made through their 0.75% back to the charities that support the fund.
WOMN will track an index developed by Equileap, the Dutch gender research firm, that is made up of US large caps. Companies will be chosen based on an incredibly detailed and fine-grained assessment of how well they do by women.
First, the index screens companies for gender balance at every level, from executives to management to the general workforce.
Second, it looks at work hours and pay. Companies that pay women more while working them less and providing more flexibility are ranked higher.
Third, it looks at training and work conditions. The index screens companies for anti-sexual harassment training programs, employee health, and human rights commitments – among other things.
Lastly, it checks whether the company has signed the UN’s empowerment principles and whether there have been any gender-related lawsuits against the company.
NACP’s will take a similar approach to WOMN, although the prospectus does not name its index or spell out how specifically it works. In a press release, NAACP, the charity backing the fund, said:
“NACP offers socially conscious investors the opportunity to allocate capital to incentivize companies to change their business practices and, in some cases, their products and services, to promote minority communities in the United States.”
Analysis – Who’s going to buy it?
While its great to learn these ETFs are trying to do the right thing by women and minorities, NACP and WOMN will still have to attract assets. It’s important to note that although Impact Shares is a registered charity that’s partnered with the Rockefeller Group (and will thus enjoy tax advantages) it is structured as a white labeller. Running a white labelling ETF service requires lawyers, a capital markets team and G&A staff – which can sometimes be costly. Thus one would presume if these funds fail to gather assets, the ETFs will be forced to fold (which would be a shame). Which begs the question: who is going to buy them?
When ETF providers roll out ESG funds they often have end buyers ready. When State Street rolled out its gender diversity ETF (SHE), it had CalSTRS waiting with $200m. When UBS rolled out its SRI ETFs in Switzerland it knew it could bank on pension funds with investment mandates in Switzerland. Something similar was true for BetaShares in Australia, whose successful ESG ETFs were listed in the knowledge they had backing from an Aussie super fund.
In order to donate $500,000 a year to charity, we would estimate these funds need roughly $130 million in assets (based on their 0.75% fees, assuming half goes to the issuer). Will this be possible? Maybe. But we’ll have to see.
Thematic ETF specialist Global X is listing a new ETF that tracks self-driving cars. The Global X Electric Vehicles & Autonomous Vehicles ETF (DRIV) will use algorithms to pick companies that “are involved in the development of electric vehicles and/or autonomous vehicles,” the prospectus says, including those that make components for those cars and those that provide services for them.
DRIV then grades companies based on their exposure to three categories: electric vehicles, electric vehicle components and autonomous vehicle technology. Companies that receive the highest ratings (i.e. are the most exposed) are then dropped into the index, with 15 companies taken from the electric vehicles category, 30 from components and 30 from technology. Companies are chosen based on market cap.
DRIV charges 0.68% a year.