Vident Financial, a Georgia-based $5 billion ETF provider, is listing three new smart beta ETFs, targeting companies with solid intellectual property.
- Innovation Alpha Global ETF (INAG)
- Innovation Alpha United States ETF (INAU)
- Innovation Alpha Trade War ETF (TWAR)
INAG and INAU use the same methodology, for global and US companies respectively.
They both track indexes that weight companies by “innovation ability”, the prospectus says. Innovation ability is assessed by a companies’ global IP, like patents and trademarks, and other intangible assets, like licenses, permits and designs.
More deeply, the funds judge innovation ability by looking at the degree to which companies’ IP is legally enforceable and how much it gets used while also comparing competing companies IPs against each other.
INAU will hold 100 companies; INAG will hold 120. Both limit the turnover in annual rebalances to 10% of the portfolio to lower transaction costs. The funds charge a steep 0.81%.
TWAR starts out similarly to the other two funds, looking at companies’ IP. But then takes an extra step of “identifying the extent to which each company is expected to be affected by a trade war”. This primarily involves seeing how much “government patronage” a company receives: the more the better.