The Securities and Exchange Commission, by law, gets between 60 and 75 days to review proposed new funds before they can be offered for sale to the public. Each month, Funds in Registration gives you a peek into the new product pipeline. We found 17 active funds and ETFs in registration, some quite notable. Expect them to launch by the end of September 2020.
The key additions are the three DFA active ETFs, which mimic three DFA funds. DFA, for better or worse, has long marketed its exclusivity. Dimensional Fund Advisors was launched in 1981 by Rex Sinquefeld and David Booth. They were early advocates of what we now call “smart beta.” While endorsing both the efficient markets hypothesis and indexing, they strayed away from simple market cap based portfolios and toward ones that accounted for other important variables such as size and quality. In general, they start with a simple indexed portfolio then make small “tilts” in favor of factors such as size, value, or profitability. Traditionally DFA funds were available only through advisors who had, themselves, completed training offered by DFA.
DFA manages over $500 billion in assets and the founders have done well enough that the University of Chicago School of Business from which the founders both graduated, is now named the Booth School of Business in recognition of Mr. Booth’s $300 million gift.
The firm promises that “the new ETFs, planned for later this year, will be managed in accordance with the same investment philosophy, research, and systematic investing approach as our existing portfolios, but in an actively managed, transparent ETF structure.”
The significance of DFA is magnified by the fact that a team of former DFA professionals, including their co-CEO/CIO, have an active ETF in the pipeline under American Century’s Avantis line (below).
Every month the ETF industry breathlessly trots out a few ideas designed to seize the moment. Last month, it was the Digital Health and Telemedicine ETF which tracks a new index about which no information is available, except that if your annual report includes both the words “digital” and “health,” you’re in! This month brings the iShares Virtual Work and Life Multisector ETF which invests in the companies that “support an increasingly virtual way of life across entertainment, wellness and learning.” Which is to say, almost all of them?
American Beacon NIS Core Plus Bond Fund
American Beacon NIS Core Plus Bond Fund will seek high current income. The plan is to invest in a diversified mix of U.S. dollar-denominated U.S. and foreign investment grade fixed income securities with the proviso that they might engage in active and frequent trading. The fund will be managed by a team from National Investment Services of America, the “NIS” of the name. Its opening expense ratio for “A” shares will be 0.78%, and the minimum initial investment will be $2,500.
American Beacon TwentyFour Short Term Bond Fund
American Beacon TwentyFour Short Term Bond Fund will seek a positive return based on a combination of income and, secondarily, capital growth. The plan is to invest in a global portfolio of fixed income securities; while individual issues might carry any duration, the average duration of the portfolio is expected to be three years. The fund will be managed by a three-person team from TwentyFour Asset Management (US) LP. Its opening expense ratio for “A” shares is 0.87%, and the minimum initial investment will be $2,500.
Avantis Core Fixed Income ETF
Avantis Core Fixed Income ETF, an actively-managed ETF, seeks to maximize total return. The plan is to buy investment-grade quality debt obligations from a diverse group of U.S. and non-U.S. issuers. The fund will be managed by Eduardo Repetto, Mitchell Handa, and Daniel Ong. All three members of the team, plus their analysts, were hired away from Dimensional Fund Advisors where Mr. Repetto was chief investment officer. Its opening expense ratio is 0.15%.
BlackRock Future Health ETF
BlackRock Future Health ETF, an actively-managed ETF, seeks to maximize total return. The plan is to invest in a global portfolio of small- to mid-cap companies whose business centered on human (primarily), animal, or plant health. The fund will be managed by Erin Xie of BlackRock, who also manages their five-star Health Sciences Opportunities Fund (SHSAX). Its opening expense ratio has not been disclosed.
BlackRock Future Innovators ETF
BlackRock Future Innovators ETF, an actively-managed ETF, seeks long-term capital appreciation. The plan is to invest in a global portfolio of small- and mid-cap companies that are “innovative.” Even they put “innovative” in quotation marks. The fund will be managed by Phil Ruvinsky, who also manages their five-star Mid Cap Growth Fund (CMGIX). Its opening expense ratio has not been announced.
BlackRock Future Tech ETF
BlackRock Future Tech ETF, an actively-managed ETF, seeks to maximize total return. The plan is to create a global, all-cap portfolio of tech stocks, with a particular emphasis on finding “next-gen” tech stocks. The fund will be managed by Tony Kim, who also manages their five-star Technology Opportunities Fund (BGSAX). Its opening expense ratio has not been announced.
Cambria Africa ETF
Cambria Africa ETF (AFKA), an actively-managed ETF, seeks long-term capital appreciation. The plan is to buy “the equities of African companies that exhibit factor characteristics commonly associated with value and quality investments.” The fund will be managed by Mebane Faber. Its opening expense ratio has not been released.
Cambria Endowment Style ETF
Cambria Endowment Style ETF (ENDW), an actively-managed ETF, seeks income and capital appreciation. The plan is to create “diversified exposure to all of the major asset classes in the various regions, countries, and sectors around the globe.” They hope to combine “an aggressive risk profile” with an emphasis on “absolute positive returns.” It will be a fund of ETFs that relies, in part, on leverage. The fund will be managed by Mebane Faber. Its opening expense ratio has not been disclosed.
Cambria Global Tail Risk ETF
Cambria Global Tail Risk ETF (FAIL, really?), an actively-managed ETF, seeks to provide income and capital appreciation from investments in U.S. and ex-U.S. sovereign bonds while protecting against the significant downside risk of equity markets outside the United States. The fund will be managed by Mebane Faber. Its opening expense ratio has not been disclosed.
CornerCap Fundametrics Large-Cap ETF
CornerCap Fundametrics Large-Cap ETF (FUNL), an actively-managed ETF, seeks long-term capital appreciation. (“Fundametrics.” It’s good to find a new term that displaces “Quantamental” on my oh-dear-lord list.) The plan is to invest in domestic large-cap stocks using the Fundamentrics system, which emphasizes relative valuation, earnings growth rates, and cash flow measurements. The fund will be managed by a team from CornerCap Investment Counsel. Its opening expense ratio is 0.5%.
Dimensional Emerging Markets Core ETF
Dimensional Emerging Markets Core ETF, an actively-managed ETF, seeks long-term capital appreciation. The plan is to invest in companies in emerging and frontier markets, taking into account a company’s size, value, and/or profitability. The fund will be managed by the team responsible for its Emerging Markets Emerging Markets Core Equity Fund (DFCEX). Its opening expense ratio has not been disclosed.
Dimensional International Core ETF
Dimensional International Core ETF, an actively-managed ETF, seeks long-term capital appreciation. The plan is to invest in companies in “Approved Markets,” taking into account a company’s size, value, and/or profitability. The fund will be managed by the team responsible for its International Core Equity Fund (DFIEX). Its opening expense ratio has not been disclosed.
Dimensional US Core ETF
Dimensional US Core ETF, an actively-managed ETF, seeks long-term capital appreciation. The plan is to invest in large cap stocks, taking into account a company’s size, value, and/or profitability. The fund will be managed by the team responsible for its US Core Equity Fund (DFEOX). Its opening expense ratio has not been disclosed.
Drawbridge Dynamic Allocation ETF
Drawbridge Dynamic Allocation ETF, an actively-managed ETF, seeks long-term capital appreciation. The plan is to use a rules-based models-driven approach to invest across a diversified universe of ETFs within eight rotation-based sub-strategies. The fund will be managed by Matthew Tuttle, of Tuttle Tactical Management. Its opening expense ratio is 2.02%.
Evolutionary Tree Innovators Fund
Evolutionary Tree Innovators Fund will seek long-term growth of capital. The plan is to invest in 25-35 domestic growth-oriented companies that qualify as “leading innovative businesses.” The fund will be managed by Thomas M. Ricketts, formerly a senior portfolio manager on Sands Capital’s flagship Select Growth US Large-Cap Growth strategy, a $20+ billion concentrated-growth strategy. Its opening expense ratio has not been disclosed, and the minimum initial investment will be $50,000.
RG Gold+ Fund
RG Gold+ Fund will seek long-term capital appreciation. The plan is to buy precious metals, cryptocurrencies, and fixed income securities and to engage in “very frequent trading.” The fund will be managed by Ben McMillan. Its opening expense ratio is 2.45%, and the minimum initial investment is $10,000.
WisdomTree Enhanced Commodity Strategy Fund
WisdomTree Enhanced Commodity Strategy Fund, an actively-managed ETF, seeks to achieve positive total returns in rising or falling markets. The plan is to invest in four commodity sectors (energy, agriculture, industrial metals, and precious metals) and Bitcoin, primarily through investments in futures contracts. The fund will be managed by Vassilis Dagioglu and James Stavena of WisdomTree. Its opening expense ratio has not been disclosed.
