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. All but two of those funds are either conservative income funds or hedged alternative funds.
The key additions are a growing number of low-cost ESG options, across a range of asset classes. We do not cover passively-managed ETFs, but fans of sustainable investing might want to add the upcoming Vanguard ESG U.S. Corporate Bond ETF and iShares ESG Screened S&P 500 ETF to their watchlists. iShares also has S&P mid-cap and small-cap ESG ETFs in the pipeline.
Of less consequence to most of us is that fact that Morningstar plans to launch a suite of funds designed for use in their managed portfolio program.
- Morningstar U.S. Equity Fund
- Morningstar International Equity Fund
- Morningstar Global Income Fund
- Morningstar Total Return Bond Fund
- Morningstar Municipal Bond Fund
- Morningstar Defensive Bond Fund
- Morningstar Multisector Bond Fund
- Morningstar Unconstrained Allocation Fund
- Morningstar Alternatives Fund
The equity funds typically have four sub-advisers and more than a dozen portfolio managers, the fixed-income funds about half that. Expenses have not yet been disclosed and, to be clear, no, you can’t buy on your own.
Every month the ETF industry breathlessly trots out a few ideas designed to seize the moment. Last month, it was the Virtual Work and Life ETF which tracks a new index of companies that “provide products, services, and technologies that empower individuals to work remotely, and support an increasingly virtual way of life across entertainment, wellness, and learning.” This month brings the ISE Mobile Payments® ETF (IPAY) which tracks an index of firms, currently 26, which make their money in “payments-related products and/or services.” Visa, Mastercard, and Paypal are 25% of the fund.
Ashmore Emerging Markets Investment Grade Income Fund
Ashmore Emerging Markets Investment Grade Income Fund (MSTB) will seek to maximize income, with a secondary objective of long-term capital appreciation. The plan is to invest in “hard currency” EM bonds. The fund will be managed by a team which includes CIO Mark Coombs. Ashmore has a lot of experience in EM fixed income, including products available only to European investors. Its opening expense ratio has not been released, and the minimum initial investment for “A” shares will be $1,000.
C WorldWide International Equities Fund
C WorldWide International Equities Fund will seek long-term growth of capital exceeding the return of the market with a moderate risk profile. The plan is to invest in 25-35 non-US large-cap companies that qualify as “sustainable growth companies.” Between 30-50% of the portfolio will be invested in stable blue-chip names, giving the manager some flexibility to add opportunistic picks. The fund will be managed by a team person team from C WorldWide Asset Management Fondsmaeglerselskab A/S of Denmark. The firm was founded in 1986 and manages about $20 billion in assets. The team has been managing private money with this strategy since 1986 and they have, pretty consistently, outperformed the MSCI All-World ex-US index by a margin of two-to-one. They’ve returned 13.9% since inception, against 5.8% for the benchmark. Its opening expense ratio is 0.80%, and the minimum initial investment for “A” shares will be $10,000.
ClearShares Piton Intermediate Fixed Income ETF
ClearShares Piton Intermediate Fixed Income ETF (PIFI), an actively-managed ETF, seeks current income consistent with the long term preservation of capital. The plan is to use both a macro-level assessment and individual securities analysis to put together an intermediate (3-10 year) bond portfolio. The fund will be managed by Brian Lockwood and Ralph Chan, both former HSBC guys. Its opening expense ratio has not been disclosed.
Leatherback Long/Short Absolute Return ETF
Leatherback Long/Short Absolute Return ETF, an actively-managed ETF, seeks an absolute return. Duh. The plan is to have a long portfolio of blue-chip names and a short portfolio of firms where the managers identify “idiosyncratic ideas that suggest a security’s price will decline.” The portfolio will be 0-80% net long. The fund will be managed by Michael Venuto and Michael J. Winter. Previously Mr. Venuto did product development at GlobalX and Mr. Winter helped manage Otter Creek Long/Short Opportunity Fund. Its opening expense ratio has not been disclosed.
Leatherback Long/Short Alternative Yield ETF
Leatherback Long/Short Alternative Yield ETF, an actively-managed ETF, seeks capital appreciation and income. The plan is to build an all-cap long portfolio of high shareholder yield companies (identified as those with a combination of dividends, stock buybacks, and debt pay downs) and a short portfolio of miscellaneously sucky companies. The managers have the option of investing in fixed-income and convertible products as well, but those are secondary The fund will be managed by Michael Venuto and Michael J. Winter. Previously Mr. Venuto did product development at GlobalX and Mr. Winter helped manage Otter Creek Long/Short Opportunity Fund. Its opening expense ratio has not been disclosed.
LHA Market State Tactical Beta ETF
LHA Market State Tactical Beta ETF, an actively-managed ETF, seeks returns that outperform the large-capitalization U.S. equity market on a risk-adjusted basis. The plan is to do really complicated stuff based on the advisor’s estimation of the volatility of the market. It appears that they will have about a 90% exposure to the S&P 500 in normal markets but volatile markets will see them switch to volatility futures, options, and leveraged, inverse, and inverse-leveraged ETFs. The fund will be managed by Michael Thompson and D. Matthew Thompson of Little Harbor Advisors. They’ve been using this strategy in separately-managed accounts since 2016. Its opening expense ratio is 1.16%.
Loomis Sayles Credit Income Fund
Loomis Sayles Credit Income Fund will seek high current income with a secondary objective of capital growth. The plan is to build a portfolio of global fixed-income securities, mostly investment grade but with up to 35% junk bonds and 30% foreign securities. The fund will be managed by a team headed by Matthew J. Eagan. Its opening expense ratio has not been disclosed, and the minimum initial investment for “A” shares will be $2,500.
Mairs & Power Minnesota Municipal Bond ETF
Mairs & Power Minnesota Municipal Bond ETF, an actively-managed ETF, seeks current income that is tax-free from Minnesota investors. M&P is, of course, famously headquartered in Minnesota and has a strong predilection for investing in regional firms. The plan is to buy “all types” of munis, typically 75% of which will be investment grade. The fact that one of the stated risks is “large shareholder risk” implies that the fund was created at the behest of … well, large shareholders. The fund will be managed by Brent S. Miller and Robert W. Thompson. Its opening expense ratio has not been disclosed.
Old Westbury Credit Income Fund
Old Westbury Credit Income Fund will primarily seek income. The plan is to buy “any debt instrument, including corporate and sovereign bonds, leveraged loans (or bank loans), municipal securities, and securitized instruments (including mortgage- and asset-backed securities)” that they believe makes sense. The fund will be managed by a team from Bessemer Investment Trust while help from niche BlackRock and Muzinich teams. Its opening expense ratio has not been disclosed, and the minimum initial investment will be $1,000.
Regan Total Return Income Fund
Regan Total Return Income Fund will seek to provide a high level of risk-adjusted current income and capital appreciation. The plan is to invest in relatively short-term (under five years) mortgage-backed securities. The fund will be managed by Skyler Weinand, Arup Saha, and Chris Hall of Regan Capital. Its opening expense ratio has not been disclosed, and the minimum initial investment will be $1,000.
Rimrock Emerging Markets Corporate Credit Fund
Rimrock Emerging Markets Corporate Credit Fund will seek to maximize long-term total return. The plan is primarily to buy EM corporate debt, roughly in line with the maturity of its benchmark. Currently, that’s 4.68 years, give or take two years. The fund will be managed by Novruz Bashirov. His pedigree includes stints at Barings, PIMCO and Fidelity. Its opening expense ratio has not been disclosed, and the minimum initial investment will be $5,000.
SoFi Weekly Income ETF
SoFi Weekly Income ETF, an actively-managed ETF, seeks current income. The plan is to invest in a variety of fixed-income instruments with a fixed or floating (variable) interest rate, with the expectation of sending out a weekly check (?). I’ve got no idea why the “weekly” thing is anything other than a marketing gimmick. The fund will be managed by the team from Income Research + Management and CSat Investment Advisory, L.P., doing business as Exponential ETFs. Its opening expense ratio has not been disclosed.
SPDR Bloomberg Barclays 3-12 Month T-Bill ETF
SPDR Bloomberg Barclays 3-12 Month T-Bill ETF, a passively-managed ETF, tracks a T-bill index. It strikes me as worth noting as an alternative to money market funds. The key distinction is that money markets can’t afford to let their NAV drop below $1.00 (aka, “breaking the buck”) which often requires subsidies from the adviser. This is probably a more honest way to tap this sliver of the market. The fund will be managed by Todd Bean, Sean Lussier, and April Borawski. Its opening expense ratio has not been disclosed but needs to be durn near zero since the three month T-bill pays 0.13% and the one-year T-bill pays 0.15% (both as of 6/30/2020).
T. Rowe Price Short Duration Income Fund
T. Rowe Price Short Duration Income Fund will seek income consistent with limited fluctuation in principal value and liquidity. The plan is to center the portfolio on investment-grade corporate and securitized instruments within the U.S. while also incorporating “plus” sectors to enhance income and portfolio diversification. The “plus” group includes bank loans, international and EM debt, and non-IG debt. The fund management has not yet been named. (Odd.) Its opening expense ratio is 0.4%, and the minimum initial investment will be $2,500.
Trend Aggregation Conservative ETF
Trend Aggregation Conservative ETF, an actively-managed ETF, seeks total return. The plan is to invest in ETFs, REITs, MLPs, dividend-paying stocks, volatility-linked securities, and inverse ETFs. Other than “multiple models,” there’s not a lot of detail on what they’re planning. The fund will be managed by Matthew Tuttle of Tuttle Tactical. Its opening expense ratio has not been disclosed.
VELA Small Cap Fund
VELA Small Cap Fund will seek long-term capital appreciation. The plan is to buy undervalued small caps. The management team has not been disclosed, its opening expense ratio has not been disclosed, and the minimum initial investment has not been disclosed. Shells for VELA Large Cap 130/30 and International are contained in the same prospectus. These may be linked to an identically positioned series of Aperture Funds, whose prospectus is similarly incomplete and riddled with typos (the “Portfolio Mjnagers” remain unnamed).
Wells Fargo Ultra Short Duration Income ETF
Wells Fargo Ultra Short Duration Income ETF, an actively-managed ETF, seeks current income consistent with capital preservation. The plan is to buy high-quality, U.S. dollar-denominated short-term fixed-, floating- and variable-rate debt securities rated investment grade. The fund will be managed by a Wells Fargo team headed by Travis Dugan. Mr. Dugan, a PIMCO veteran, uses the same discipline to manage $4.5 billion for rich folks in separately managed accounts. Its opening expense ratio has not been disclosed.
