Industry Updates

Dead retail; smart junk; small cap value -- and more

David Tuckwell

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Today's new ETF listings from around the world.


Opus lists small cap value ETF

Alabama-based Opus Capital Management is teaming up with white labeller ETF Series Solutions to list an actively managed value small cap ETF. The Opus Small Cap Value Plus ETF (OSCV) will invest 80% or more of its assets in US small caps, using the Russell 2000 definition of small cap.

In selecting which small caps to invest in, Opus uses a "factor-based analysis with rigorous fundamental research to identify high-quality, growing companies that the sub-adviser believes are undervalued," the prospectus says. Opus focuses on three themes to help it pick companies:

(i) Higher quality: Companies with sound business models, higher returns on equity, strong balance sheets, and shareholder-friendly management.

(ii) Higher growth: Companies that are well-positioned to grow sales, earnings, cash flows, and dividends.

(iii) Lower valuation: Companies whose valuations reflect lower price-to-earnings and higher yields than their peers.

Opus will generally sell a stock when it believes the company is no longer of a high quality; when its anticipated growth rate has significantly declined; when it is no longer considered undervalued; or when it is no longer considered a small-cap after a significant period of time (e.g., more than one year).

ProShares lists internet shopping ETF

Maryland-based alternative ETF specialist ProShares is listing its third internet shopping thematic ETF, this time aimed at provide diversified long-only exposure to the growth of online retail.

The ProShares Online Retail ETF (ONLN) will track an in-house index that measures the performance of online retailers.

Index construction begins by setting the parameters of the universe, which includes any companies listed on US exchanges, including foreign companies. To then qualify for inclusions, companies must "be classified as doing business as an online retailer, an e-commerce retailer, or an internet and direct marketing retailer according to standard industry classification systems," the prospectus says.

Companies must have a market capitalization of at least $500 million, a six-month daily average value traded of at least $1 million and "meet other requirements in order to be included in the Index," the prospectus says. Although it doesn't specify what those other requirements are.

Companies are weighted in the index by market capitalisation, subject to limits. These limits restrict the weighting of any single company (Amazon, one presumes) to 24% of the index total and prevent the weight of the biggest handful of companies collectively exceeding 50% of the index's weight. It also restricts foreign companies to a maximum of 25% weight. The index is rebalanced monthly.

Smart beta junk bond ETF from FlexShares

FlexShares, a subsidiary of Chicago-based Northern Trust, is bringing in a new high yield bond ETF that tries to provide an even higher yield than most junk bond ETFs, while screening for quality.

The FlexShares High Yield Value-Scored US Bond Index Fund (HYGV), starts with Northern Trust High Yield US Corporate Bond Index as its parent index. From there, HYGV restricts the selection pool to bonds with more than 18 months to maturity and an outstanding principal balance of at least $150 million.

From this eligible universe, HYGV picks its bonds based on the fundamentals of the companies issuing the bonds. Northern Trust will be charged with assessing companies' fundamentals in accordance with the index rules, the prospectus indicates.

At rebalancing, constituents' weights will be rebalanced to ensure that:

(i) the effective duration of the HYGV similar to the parent index;

(ii) HYGV's sector exposure is within +/- 8% of the sector exposure of the parent index;

(iii) each issuer is capped at 5% of the fund's weight.


Next Funds lists emerging markets bond tracker

Next Funds, an arm of Nomura Group, the largest Japanese asset manager, is listing an EM debt ETF of the type that is proving popular in Europe. The Next Funds Emerging Market Bond J.P. Morgan EMBI Plus ETF (2519) will track the JP Morgan EMBI Plus Composite Index, which measures emerging markets debts, including US dollar-denominated Brady bonds and Eurobonds


Hanwha lists inverse Kosdaq ETF

Hanwha Group, a chaebol based on Seoul, is listing a new inverse ETF. The Hanwha ARIRANG KOSDAQ150 F-Inverse ETF (301410) will track the performance of F-KOSDAQ150 Index. The index gives the performance of the "daily volatility of NAV per share similar to one negative multiple of the daily volatility of the F-KOSDAQ150 Index," Kosdaq's website says.

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