Industry Updates

IBM's Watson to manage an ETF

David Tuckwell

Today's listings

Massively busy in the US and somewhat busy in Europe.


IBM Watson to actively manage an ETF

IBM's famous supercomputer Watson has found its way to ETF land and will be used to help manage a new ETF.

ETF Managers Trust, an arm of the world's biggest ETF "white labeler" Exchange Traded Concepts, is teaming up with IBM-backed EquBot to list a new actively managed ETF, The Equbot with Watson AI Total US ETF (AIEQ).

AIEQ will use Watson's supercomputer to break down 10 years worth of equity data and apply it to current market trends.

From this, EquBot will buy the stocks of anything between 30 and 70 companies that it thinks have the "greatest potential for appreciation... while maintaining volatility comparable to the broader U.S. equity market," the prospectus says. AIEQ can invest in any listed company.

Final decisions over which companies are bought and sold rests with people at EquBot. Watson will not be making any trading decisions. It will only provide modeling from which "recommendations" can be drawn.

New issuer Advisors Asset Management lists two dividend ETFs

ETF newcomer Advisor Asset Management has listed two new dividend ETFs in New York, the AAM S&P 500 Sector High Dividend ETF (SPDV) and the AAM S&P Emerging Markets Sector High Dividend ETF (EEMD).

As its name suggests, SPDV picks and chooses stocks depending on how high and robust their dividends are. Stocks' dividends are assessed by free-cash-flow yields and dividend yields. SPDV takes the best five from each of the S&P's major sectors, the prospectus says.

EEMD does more or less the same thing, but for emerging markets via the S&P Emerging Plus LargeMidCap Index.

KraneShares lists Chinese environment ETF

World pollution capital China might seem like a strange place to go hunting for environmentally-driven businesses, but KraneShares has other ideas.

As part of a raft of new listings in New York, KraneShares is listing the KraneShares MSCI China Environment Index ETF (KGRN).

KGRN will track Chinese companies that "focus on contributing to a more environmentally sustainable economy by making efficient use of scarce natural resources or mitigating... environmental degradation," the prospectus says.

KGRN will invest 80% of its assets securities in its underlying MSCI index and leave 20% of the fund available to invest in stocks KraneShares believes will help replicate the index' performance.

IndexIQ lists two active municipal bond ETFs

IndexIQ is issuing two actively managed bond ETFs in New York, the IQ Municipal Insured ETF (MMIN) and the IQ Municipal Intermediate ETF (MMIT).

MMIN will invest 80% of its assets in the debts of local branches of the US government, be they territory, state, commonwealth or otherwise. For the bonds to qualify, they have to have to be covered by insurance policies that guarantee the "timely payment of principal and interest," the prospectus says.

MMIT will work in a similar manner, only it will focus on municipal bonds with an intermediate maturity of 3 to 10 years.

The remaining 20% of both funds' assets can be invested in a limited number of other kinds of debts, such as commercial papers, and T-bills.

An ETF to track Trump's changes in tax

EventShares, of Democratic and Republican Party Policies ETF fame, has listed another politicised ETF, the US Tax Reform Fund (TAXR).

TAXR will be actively managed and hunt down companies most likely to gain from Trump's pending changes to the US tax code (and changes to tax laws in the future).

TAXR will continue to hunt for the beneficiaries of tax policy changes throughout time, "regardless of whether the change increases or decreases the tax burden," the prospectus says.

How TAXR would be different to EventShares' Republican Policies ETF, which would presumably in large part concern itself with Republican tax policy, was not clear.

Calvert lists short-term ETMF on NASDAQ

It's not often that new ETMF's get listed. They're sometimes thought to be an inferior version of ETFs. And its ETFs that get more of the attention and more of the money. But today we have a new ETMF listing.

Active manager Calvert has listed a new ETMF on NASDAQ that targets bonds with super short maturity dates, the Calvert Ultra-Short Duration Income NextShares (CRUSC). NextShares is Calvert's branding term for its ETMFs.

CRUSC will invest at least 80% of its assets in floating-rate notes and debts with durations of one year or less, the prospectus says. At least two-thirds of the debts selected will be investment grade, leaving one-third open to invest in junk debts.


Germany and UK

VanEck lists smart beta ETF

VanEck is bringing its American preferred securities ETF across the Atlantic to London and Germany.

The VanEck Vectors Preferred US Equity UCITS ETF (PVF, PRF, PRGB) will track the Wells Fargo Hybrid and Preferred Securities Aggregate Index, which puts together preferred securities that are listed on US exchanges.

Preferred securities are a "hybrid" stock that sit between equity and debt in a company's capital structure. They're like equity in that they get paid out after bonds, but like bonds in that they have regular fixed payments.

Preferred securities generally provide higher yields than bonds, but are riskier. This can make them appealing to some investors in low-interest rate environments.

ETFs in the US that track preferred securities have accumulated billions in assets.


iShares lists virtue signaling ETF

SRI funds are being launched everywhere. There are now more than 50 SRI ETFs around the world, provided by almost all the major issuers on most major stock exchanges.

iShares is listing a new ETF that tracks the "best in class" SRI companies from around the world, the iShares MSCI World SRI UCITS ETF (SUSW, SUWS).

The index tracks large-cap companies in rich countries that are thought to do the right thing - or, at least, less of the wrong thing - by the environment, by society and communities.

The main three companies in the index are Microsoft, Procter & Gamble and Roche Holding Genuss.


iShares lists floating rate ETF in Milan

iShares is listings its floating rate note tracker in Italy, the iShares $ Floating Rate Bond UCITS ETF (FLOE, FLTR). The fund aims to track the performances of the Bloomberg Barclays US Floating Rate Note <5 Years Index. iShares has ETFs tracking this index in local currency and USD trading on most major stock exchanges.

Today's news from around the web

ETFs at discounts in a crash: putting water back in the hose

An active manager gives a great analogy that explains what happened during the ETF flash crash last year, where ETFs traded at more than 20% below the value of their underlying index.

"Step One: Fill a pool with a hose (inflows into ETF are slow and steady).

Step Two: Now flip the pool over and try and pour the water back into the hose (outflows tend to be more intense).

Step Three: Now try and not get wet (underlying price change can be dramatic)."

Invesco boss warns on ETFs concentrating risk

Invesco boss Martin Flanagan has warned that investors blindly putting money into index trackers risks expanding systemic risk. If the market takes a nosedive then losses will be disproportionate, he says. Invesco is a smart beta specialist and is not big in the plain vanilla market cap weighted space.

Japan could come back as a value strategy

Japanese ETFs are out of favour this year. Some of the biggest Japan-trackers in the US have seen several hundred million dollars in outflows. The outflows come despite the popularity of overseas trackers and despite the solid performance of Japanese ETFs. But this could change as factor products are starting to see Japanese ETFs as value.

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