ETF Hearsay

Tuesday, May 4, 2021

New provider files first ETF

US VALUE ETF

Ticker: TBD
Exchange: NYSE Arca
Expense ratio: TBD

Summary

Lyrical, the fund adviser, has a successful actively-managed mutual fund with the same name as the ETF they just filed. However, this is not a conversion of a mutual fund to ETF, but rather a separate fund that tracks a Solactive index.

Original filing date: April 30, 2021
Effective date: July 14, 2021
Listing Date: TBD
CUSIP: TBD
Active: No
Index / Benchmark: [Solactive] TBD

Investment Objective:
Seeks to track the investment results (before fees and expenses)) of the [ ] Index (the “Index”)

Investment Strategy / Index Methodology:

Universe: Largest 1,000 US stocks

200 stocks from universe with lowest next 12 month projected Price to Earnings ratio, equal-weighted. Quarterly reconstitution and rebalance.

Constituents: 200

Adviser: Lyrical Asset Management LP
Sub-Adviser: 0
Portfolio Managers: Andrew Wellington
Administrator: Ultimus Fund Solutions, LLC
Fund accountant: Ultimus Fund Solutions, LLC
Transfer agent: Brown Brothers Harriman & Co.
Custodian: Brown Brothers Harriman & Co.
Distributor: Northern Lights Distributors, LLC
Legal counsel: Kilpatrick Townsend & Stockton LLP
External accounting: TBD

Prospectus is here.

Company URL: www.lyricalvaluefunds.com/etf

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PRINCIPAL INVESTMENT STRATEGIES

The Fund employs an indexing investment approach designed to track the performance of the Index. The Fund attempts to replicate the Index by investing all, or substantially all, of its assets in the stocks that make up the Index, holding each stock in approximately the same proportion as its weighting in the Index.

[Solactive AG] (the “Index Provider”) compiles and calculates the Index. The Index is comprised of the equity securities of the “cheapest” quintile of the 1,000 largest (by market capitalization) U.S. companies. Cheapest is defined as the lowest projected forward price-to-earnings ratio for the next twelve months (“NTM P/E”).

The NTM P/E is determined using the greater of the non-GAAP or GAAP median consensus estimate of forward price-to-earnings ratio available as of the quarter end date. Each stock in this bottom (cheapest) quintile is then equally weighted as compared to other stocks within the Index. The Index and the Fund are each reconstituted and rebalanced on a quarterly basis.

The Fund will concentrate its investments (i.e., invest 25% or more of the value of its total assets) in securities of issuers in an industry or group of industries to approximately the same extent that the Index reflects a concentration in that industry or group of industries. The components of the Index and the percentages represented by various sectors in the Index may change over time, thus the Fund’s portfolio holdings, and the extent to which it concentrates its investments, are likely to change over time.

The Fund attempts to replicate the Index by investing all, or substantially all, of its assets in the stocks that make up the Index, holding each stock in approximately the same proportion as its weighting in the Index.

New Active ETF filed

Virtus Duff & Phelps Clean Energy ETF

Ticker: VCLN
Exchange: TBD
Expense ratio: TBD
Original filing date: May 4, 2021
Effective date: July 19, 2021
Listing Date: TBD
CUSIP: TBD
Active: Yes
Index / Benchmark: Not Applicable

Investment Objective:
Seeks capital appreciation.

Investment Strategy / Index Methodology:

Investable Universe:

Global stocks with minimum market cap of $500 million
Sectors: utilities, industrials, technology and energy sectors that are involved in clean energy.

Identify superior companies:

Production, provision, and transmission of energy
Bottom-up analysis
Quantitative and qualitative research

Constituents: TBD

Adviser: Virtus ETF Advisers LLC
Sub-Adviser: Duff & Phelps Investment Management Co.
Portfolio Managers: Benjamin Bielawski, CFA; and Eric Fogarty, CFA
Administrator: Virtus ETF Solutions, LLC
Fund accountant: The Bank of New York Mellon
Transfer agent: The Bank of New York Mellon
Custodian: The Bank of New York Mellon
Distributor: VP Distributors, LLC
Legal counsel: Stradley Ronon Stevens & Young, LLP
External accounting: TBD

Prospectus is here.

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Under normal market conditions, the Fund will invest not less than 80% of its net assets (plus the amount of any borrowings for investment purposes) in equity securities of clean energy companies. Duff & Phelps Investment Management Co., the Fund’s sub-adviser (the “Sub-Adviser”), defines clean energy companies as those that derive a majority of their value from one or more of the following clean energy businesses:

(a) the production of clean energy (e.g., biofuel, biomass, hydroelectricity, solar energy, wind energy, and battery storage, among others);

(b) the provision of clean energy technology and equipment; or

(c) the transmission and distribution of clean energy.

In determining whether a company derives a majority of its value from clean energy businesses, the Sub-Adviser may evaluate the company’s reported or estimated
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA);
Free Cash Flow (FCF);
asset base;
customer base;
technologies or business segment;
long term sustainability;
displacement of current technologies;
and/or other similar criteria.

In seeking eligible investments, the Sub-Adviser starts by screening U.S. and non-U.S. markets, including emerging markets (i.e., those that are in the early stages of their economic development), for companies in the utilities, industrials, technology and energy sectors that are involved in clean energy.

Companies are only considered for inclusion in the Fund’s portfolio if they are listed on an exchange and have a minimum float adjusted market capitalization of greater than U.S. $500 million.

The Sub-Adviser then narrows the universe by focusing solely on companies involved in one or more of the three clean energy business segments discussed above.

Next, the Sub-Adviser sets eligibility requirements to avoid companies that may be in the right sectors or appear attractive but are not truly clean energy companies, as defined by the Sub-Adviser.

Once the Sub-Adviser has identified the investable universe, it applies a bottom-up research-driven process, with an emphasis on stock selection, to select the Fund’s final portfolio.

The Sub-Adviser seeks to identify superior clean energy companies by performing an in-depth fundamental business analysis on securities within the targeted investment universe, which includes a qualitative and quantitative assessment of investment outlook, regulatory and political events, and financial strength.

No individual security comprises more than 10% of the total portfolio’s market value at the time of investment. The Sub-Adviser will typically sell a security when it believes a more attractive opportunity is available, or its investment thesis changes.

New Income-focused ETF to list this Friday, May 6, 2021

WisdomTree Alternative Income Fund
Ticker: HYIN
Exchange: Cboe BZX

Expense ratio: 3.20% = 0.50% management fees + acquired fees from underlying Publicly Traded Alternative Credit Vehicles (PACs)

Investment Objective:
Seeks to track the price and yield performance, before fees and expenses, of the Gapstow Liquid Alternative Credit Index.

Index Methodology Summary:

35 equal-weighted PACs (CEFs, BDCs, and REITs) across six sectors that hold high-yielding securities, selected by descending market cap and with target number of PAC per sector.

private corporate lending (7)
public corporate debt (7)
commercial real estate lending (7)
agency real estate debt (7)
non-agency real estate debt (4)
multi-sector alternative credit (3)

Full details on index methodology at bottom of this post.

Analysis

ETF providers are responding to investors' concerns on both inflation and income, and WT responds with the WisdomTree Alternative Income Fund (HYIN). Alternative Income refers to the fund investing in equities, but those equities are publicly-traded investment vehicles that hold high-yield debt and credit. A more accurate but cumbersome nomenclature for HYIN could be "Fund of publicly-traded high-yield credit non-ETFs".

Besides the underlying high-yield instruments, the distribution yield of HYIN should further be boosted by the fact that the vehicles that hold the underlying may trade at a discount. However, as the SEC requires acquired fund fees to be displayed at the top line, HYIN's expense ratio is inflated to a whopping 3.20%, though distributions by the fund should already be net of the acquired fund fees.

Bottom line is that regardless of asset class or method, HYIN will have to deliver at least 6% [dividend] yield itself after all fees to grab the imagination of investors. Specifically, given existing ETFs, investors looking for US, diversified, non-MLP yield.

Original filing date: December 17, 2020
Effective date: March 30, 2021
Listing Date: May 6, 2021 (Friday)
CUSIP: 97717Y626
Active: No
Index / Benchmark: Gapstow Liquid Alternative Credit Index
Constituents: 35

Adviser: WisdomTree Asset Management, Inc
Sub-Adviser: Mellon Investments Corporation
Portfolio Managers:

Marlene Walker-Smith
Thomas J. Durante, CFA

Administrator: State Street Bank and Trust Company
Fund accountant: State Street Bank and Trust Company
Transfer agent: State Street Bank and Trust Company
Custodian: State Street Bank and Trust Company
Distributor: Foreside Fund Services, LLC
Legal counsel: Morgan, Lewis & Bockius LLP
External accounting: Ernst & Young LLP

Prospectus is here.

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The Index is provided by Gapstow Capital Partners, L.P. and is designed to provide diversified exposure to alternative credit sectors.
The Index is comprised of listed and publicly traded on a major U.S. stock exchange:

registered closed-end investment companies (“CEFs”), that have elected to be regulated as “business development companies” and

real estate investment trusts

To be eligible for inclusion in the Index:
(i) be registered under the Securities Act of 1933
(ii) be listed and publicly traded on a major U.S. stock exchange
(iii) have intra-day pricing provided by such exchange
(iv) have traded for at least the most recent 90 calendar days
(v) have a permanent capital structure (i.e., Vehicles that have a relatively stable number of shares outstanding, such as a CEF that rarely issues new shares or redeems existing shares)
(vi) be perpetual (i.e., without set maturity or termination dates such as target or term funds)
(vii) not invest primarily in other Vehicles (e.g., not be a CEF that invests primarily in other CEFs)
(viii) have a stated objective of investing primarily in:

public high-yield corporate bonds (“junk bonds”) and broadly-syndicated loans,

private middle market corporate loans,

collateralized loan obligations,

mortgage-backed securities,

other asset-backed securities and/or real estate loans

(ix) have a six-month average daily market capitalization of greater than $100 million
(x) have a six-month average daily trading volume greater than $750,000
Vehicles meeting the foregoing requirements are classified based on the Vehicle’s investment holdings in the following alternative credit sectors:
(i) private corporate lending
(ii) public corporate debt
(iii) commercial real estate lending
(iv) agency real estate debt
(v) non-agency real estate debt
(vi) multi-sector alternative credit
To meet classification requirements, at least 75% of a Vehicle’s investment holdings must provide exposure to a foregoing sector to be classified within that sector.
Within each sector, eligible Vehicles are selected based on market capitalization until approximately thirty-five (35) Vehicles spanning the foregoing sectors are included as constituents.
Constituents in the Index are equal-weighted.
The Index is rebalanced quarterly and reconstituted semi-annually.

Sunday, May 2, 2021

New Defined Outcome ETF to list tomorrow May 3rd: TrueShares Structured Outcome (May) ETF

TrueShares Structured Outcome (May) ETF
Ticker: MAYZ
Exchange: Cboe BZX

Expense ratio: 0.79%

Original filing date: February 4, 2020
Effective date: April 30, 2021
Listing Date: May 3, 2021
CUSIP: 53656F797
Active: No

Index / Benchmark: S&P 500 Price Return Index

Investment Objective:
Seeks returns that track the S&P 500 Price Return Index while providing a buffer against the first 8% to 12% of Index losses, over period from May 1, 2021 to April 30, 2022.

Investment Strategy / Index Methodology:

Invests in FLexible EXchange® Options (“FLEX Options”) on the S&P 500 Price Index or an ETF that tracks the S&P 500 Price Index.

Buys at-the-money call options and sells put options with a strike price 8% to 12% lower than the current value of the S&P 500 Price Return Index or an S&P 500 Price Return ETF.

Constituents: FLexible EXchange® Options (“FLEX Options”) on the S&P 500 Price Index or an ETF that tracks the S&P 500 Price Index.

Adviser: TrueMark Investments, LLC
Sub-Adviser: SpiderRock Advisors, LLC
Portfolio Managers:
Jordan C. Waldrep, CFA, Chief Investment Officer for the Adviser
Eric Metz, Chief Investment Officer for the Sub-Adviser
Fred Sloneker, Portfolio Manager for the Sub-Adviser

Administrator: U.S. Bancorp Fund Services, LLC
Fund accountant: U.S. Bancorp Fund Services, LLC
Transfer agent: U.S. Bancorp Fund Services, LLC
Custodian: U.S. Bank National Association
Distributor: Foreside Fund Services, LLC
Legal counsel: Morgan, Lewis & Bockius LLP
External accounting: Cohen & Company, Ltd.

Prospectus is here.
Summary prospectus is here.

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Thursday, April 29, 2021

New ETF based on low share price filed

Direxion Two Bucks ETF
Ticker: TBD
Exchange: NYSE Arca
Expense ratio: TBD
Original filing date: April 29, 2021
Effective date: July 13, 2021
Listing Date: TBD
CUSIP: TBD
Active: No

Investment Objective:
Seeks investment results, before fees and expenses, that track the Solactive Two Bucks Index, an index of 50 US securities with relatively low trading prices.

Index / Benchmark: Solactive Two Bucks Index
Constituents: 50

Index Methodology:
Universe: Solactive GBS United States All Cap Index
Quarterly rebalance in February, May, August, and November
To arrive at 50 securities for the index, at each rebalance securities must have:

A minimum average daily value traded of $1 million over the prior 3 months
A market capitalization of at least $85 million
Not have had a reverse stock split between Index rebalancings

When index is rebalanced in August:

The closing price for an Index component must be between $2 and $5 U.S. Dollars per share.

When the Index is rebalanced in February, May and November:

The closing price for an Index component must be between $1.25 and $10 U.S. Dollars per share.

If above rules do not yield 50 names, then instead securities must have:

A minimum average daily value traded of $1 million over the prior 3 months
A market capitalization of at least $100 million
A closing price between $2 and $5 U.S. Dollars per share
Not had a reverse stock split between Index rebalancing dates
All of the additional securities are then ranked in descending order by their share class-specific market capitalization and the securities with the highest share class-specific market capitalization are selected, until a total of 50 securities are selected for the Index.

Adviser: Rafferty Asset Management, LLC
Portfolio Managers: Paul Brigandi and Tony Ng
Administrator: U.S. Bancorp Fund Services, LLC
Fund accountant: Bank of New York Mellon
Transfer agent: Bank of New York Mellon
Custodian: Bank of New York Mellon
Distributor: Foreside Fund Services, LLC
Legal counsel: K&L Gates LLP
External accounting: Ernst & Young LLP

Prospectus is here.

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New active ETF to list tomorrow April 30

Applied Finance Valuation Large Cap ETF

Ticker: VSLU

Exchange: NYSE Arca

Expense ratio: 0.49%

Original filing date: January 08, 2021

Effective date: April 29, 2021

Listing Date: April 30, 2021

CUSIP: 26923N405

Active: Yes

Index / Benchmark: Not Applicable

Investment Objective:

Seeks long-term capital appreciation.

Investment Strategy / Index Methodology:

200 mainly large cap companies that offer superior return potential due to the company’s valuation, projected future earnings, dividends, financing activity, growth potential, recent performance, and business strategy.

Constituents: 200

Adviser: Applied Finance Advisors, LLC

Sub-Adviser: Toroso Asset Management

Portfolio Managers: Paul Blinn, Managing Member of the Adviser and Rafael Resendes, Managing Member of the Adviser

Administrator: Commonwealth Fund Services, Inc.

Fund accountant: Citi Fund Services Ohio, Inc.

Transfer agent: Citi Fund Services Ohio, Inc.

Custodian: Citibank, N.A.

Distributor: Foreside Fund Services, LLC

Legal counsel: Practus, LLP

External accounting: Cohen & Company, Ltd.

Compliance: TBD

Prospectus is here.

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New ETF listing tomorrow April 30, 2021: Formidable ETF (NYSE arca: FORH)

Formidable ETF
Ticker: FORH

Exchange: NYSE Arca
Expense ratio: 1.20%

Original filing date: December 29, 2020
Effective date: April 28, 2021
Listing Date: ~~April 30, 2021~~ May 7, 2021

CUSIP: 26923N306

Active: Yes
Index / Benchmark: Not Applicable

Investment Objective:
Seeks long-term capital appreciation.

Investment Strategy / Index Methodology:
Top-down and bottom-up research and analysis.

Constituents: 57 as of May 18, 2021

Adviser: Formidable Asset Management, LLC
Sub-Adviser: Toroso Asset Management
Portfolio Managers: Will Brown, Chief Executive Officer and Managing Partner
Adam Eagleston, CFA, Chief Investment Officer
Administrator: Commonwealth Fund Services, Inc.
Fund accountant: Citi Fund Services Ohio, Inc.
Transfer agent: Citi Fund Services Ohio, Inc.
Custodian: Citibank, N.A.
Distributor: Foreside Fund Services, LLC
Legal counsel: Practus, LLP
External accounting: Cohen & Company, Ltd.

Product page with holdings is here.
Prospectus is here.

Product factsheet is here.

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