Industry Updates

Behavioural ETFs and Chinese smart beta

David Tuckwell

Today's new ETF listings from around the world


Redwood lists a hedge fund style ETF

Toronto-based issuer Redwood is listing a new ETF on NEO Exchange, a Canadian stock exchange that blocks high-frequency trading. The Redwood Behavioural Opportunities Fund (BHAV) tries to make the most investor behavioural biases and market inefficiencies. To this end, it will target several biases, including: emotional cascade, earnings overreaction, indexing bias, unloved or less loved, neglect and crowded trades.

Emotional cascade - a new term for this writer - is a form of "availability bias" where investors are too heavily influenced by "recent or widely available information, thereby losing sight of a longer term, potentially more successful, investment outlook," the prospectus says. Such a bias becomes especially acute when a major event occurs and investors overreact.

Earnings overreaction is something similar: where investors make too much of short-term earnings and either dump or buy too much of a company based on recent earnings reports.

Indexing bias, which should be familiar to ETF observers, is when companies become overpriced or underpriced due to their being included or excluded from indexes. (This one is a well-worn path and many institutions have algorithms in place to deal with the fallouts of index dumpings).

Unloved aims to pick up stocks that have low buy ratings from agencies or whoever else.

Neglect targets spinoffs from big companies. When companies spin off parts of their business the newly dumped part can be neglected - making it a great investment opportunity.

Crowded trades targets companies that have been too heavily traded and likewise are benefiting from confirmation bias.


China Universal lists two new ETFs

Chinese asset manager and mutual fund specialist China Universal is listing two new listed funds on the Shanghai stock exchange. They are:

  • China Universal CSI Hong Kong Stocks Through High Dividend Launched Fund A (501306)

  • China Universal CSI All Share Investment Banking Brokerage Index Fund A (501048)

Featured in this article


No ETFs to show.


No topics to show.


No related articles to show.