An ETF for Entrepreneurs
New issuer EntrepreneurShares is listing an ETF that aims to replicate the successes of American entrepreneurs, the Entrepreneur 30 Fund (ENTR)
ENTR will use an in-house index to gain exposure to "the 30 largest publicly-traded, market capitalized companies that meet the key entrepreneurial standards as set forth by EntrepreneurShares," the prospectus says.
What these criteria are is not specified in any detail. The prospectus only says that the criteria involve "management, sector restrictions, ownership, compensation, company age, and growth constraints, among others."
EntrepreneurShares to date has been a mutual fund manager. As seems to be increasingly common among active managers, ENTR appears to repackage the company's mutual fund strategy with lower fees and an index.
An entrepreneur's ETF is certainly an interesting idea, but it is unclear, at least at this stage, how entrepreneurial it will be. The prospectus indicates that ENTR will track large-cap publicly traded US companies. Yet many investors tend to think that entrepreneurship happens mostly in the startup space - not with big companies with established businesses. Without any concrete criteria on what makes a company "entrepreneurial," it is possible that ENTR will offer a rebranding of Dow Jones Industrial Average companies.
This style of indexing has been somewhat common with environmental and social governance ETFs, for example. Environmentally conscientious investors are often unaware that their environmental ETFs can have fossil fuel companies in them. What index providers and ETF issuers regard as environmental can be very different to what investors regard as such. At this stage, at least, it seems unclear if ENTR will provide exposure to nimble entrepreneurial firms, or track plain old large caps under the heading of entrepreneurship.
Today's best ETF articles from around the web
Active managers have given active management a bad name
Opinion piece. No-one defends active managers anymore. It is now universally accepted that their fees are too high and they engage in irresponsible sales practices. As passive investing got popular, active managers should have been quiet and seen the need for reform. But instead they launched a propaganda campaign against ETFs, further discrediting themselves in the eyes of investors.
What's in your sector ETF?
Sector ETFs can be appealing in their simplicity - a tech ETF for technology, energy ETFs for energy etc. But do investors know what exactly is in them? Amazon and Netflix are often thought to be internet/tech companies - but they are listed in consumer discretionary. Verizon and Comcast are direct competitors, yet one is in telecoms and the other in consumer discretionary.
UBS criticises SPIVA
S&P's Indices Versus Active Funds Scorecard (SPIVA), which scores active managers against their benchmarks, is often taken as evidence that active managers underperform. But UBS has criticised SPIVA for failing to use the right benchmarks. Using UBS's data, active managers often outperform, especially in Europe.