This smart beta ETF looks for the IRS factor

by , 14th April 2018

Today’s new ETF listings from around the world

USA

Actively managed tax ETF from Schroders and Hartford (IRS factor?)

Tax is a big drag on any fund’s performance. So Hartford and Schroders are teaming up to list a new actively managed fixed income ETF that targets tax efficiency. The Hartford Schroders Tax-Aware Bond ETF (HTAB) will invest in investment-grade bonds issued by both public and private organisations, in the US and overseas.

More uniquely, HTAB fund will use “a tax-aware investing strategy that [balances]… assets among taxable and tax-exempt investments with no limitation on the amount of assets that may be invested in either category,” the prospectus says.

Among the techniques HTAB will use to minimise tax are the following: investing in municipal securities; investing in taxable securities where after-tax valuation is favorable; and employing a long-term approach to investing.

It also includes “minimizing the sale of securities with large unrealized gains, holding securities long enough to avoid short-term capital gains taxes, selling securities with a higher cost basis first and offsetting capital gains realized in one security by selling another security at a capital loss,” the prospectus says.

The fund charges 0.44%.

Direxion lists 2x robotics and AI tracker

Did you think leveraged ETFs were going out of fashion? Silly you. Leveraged ETF specialist Direxion has listed a new fund giving magnified exposure to robotics and AI. The Direxion Daily Robotics & Artificial Intelligence Bull 2X Shares (UBOT) will give double daily exposure to the Indxx Global Robotics and Artificial Intelligence Thematic Index.

The index tracks companies in developed countries that are involved in robotics or artificial intelligence. The index provider decides if companies fit in robotics and AI using a two-step approach. The first step involves reading a lot of material – industry reports, consumer data, investment research – to see how much exposure a company has to four activities:

(1) Industrial Robotics and Automation

(2) Unmanned Vehicles and Drones

(3) Artificial Intelligence,

(4) Non-Industrial Robotics

Companies with sufficient exposure will be included.

The second step looks at companies revenues and operations. A company is deemed to be exposed enough if: it generates a majority of its revenue from one of the above four themes, and it has stated its primary business to be in products and services focused on one of the themes.

Only companies with a market cap greater than $100 million and listed in a developed country will be included.

London, Germany

Two new fixed income from VanEck

VanEck’s European arm has listed two new fixed income ETFs in London and Germany. They are:

  • VanEck Vectors Global Fallen Angel High Yield Bond UCITS ETF (GFA)
  • VanEck Vectors Emerging Markets High Yield Bond UCITS ETF (HYEM)

GFA will exploit a known flaw in the global bond market. That is, when companies lose their investment-grade rating they are often dumped en masse from investment portfolios, many of which have mandates specifying they can only touch investment grade bonds. The dumping causes the fallen angels’ yields to shoot up, in a manner that often fails to capture true risk. This creates an investment opportunity, for those willing to give the angels a chance.

HYEM dives into Europe’s curious interest with emerging market debt. In Europe, EM debt trackers are very popular, with iShares’ headline EM debt trackers both having more than £5bn. HYEM tracks US dollar denominated debts from non-sovereign emerging markets issuers that are rated below investment grade. It will be interesting to see how this performs compared with the popular iShares products.

Japan

Yet another women’s empowerment ETF…

The “empowering women” movement has brought to life another ETF, this time in Japan. Nomura Asset Management is listed the NEXT FUNDS MSCI Japan Empowering Women Select Index ETF (2518). The index rates companies on how well they do by women, although a more precise description is only available in Japanese (here).

M&A

WisdomTree complete acquisition of ETF Securities

WisdomTree has completed the acquisition of ETF Securities, which was initiated last year.

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