August 22, 2011

Top Portfolio Products: Cantor Fitzgerald to Launch ETF Arbitrage, Van Eck Adds Mortgage REIT ETF

New Cannabis Science shares win preliminary approval; Vanguard welcomes Wright-Casparius; First Trust to ring NYSE opening bell

This week in new portfolio products, Cantor Fitzgerald announced that it will launch an ETF arbitrage business under Dan Segal, and Van Eck introduced a mortgage REIT income ETF. Also, Cannabis Science announced preliminary approval for a new class of shares, Gemma Wright-Casparius joined the Vanguard Group, and First Trust will ring the opening bell at the NYSE in celebration of the launch of 14 ETFs.

Here are the five latest developments of interest to advisors:

1) Cantor Fitzgerald to Launch ETF Arbitrage Business Under Dan Segal

Cantor Fitzgerald & Co. announced Wednesday the appointment of Dan Segal, formerly of SEG Capital, to launch and build its exchange traded fund (ETF) arbitrage business based in New York. Cantor also appointed Joseph La Grasta, Todd Alberico, and Kanellas Cafcules as ETF trader/market makers. As managing director of the ETF arbitrage group, Segal will report to Jarred Kessler, global head of equities.

Segal served as managing member of SEG Capital LLC, specializing in ETF market making. He was an ETF market maker on the floor of the American Stock Exchange, where he focused on trading broad-based domestic ETFs and served as an ETF specialist for Goldman Sachs. He transitioned SEG Capital's operations off the floor and expanded the firm's focus to include more complex international ETFs.

La Grasta served as partner at SEG Capital, trading domestic ETFs, and market maker on the American Stock Exchange. Alberico, who will focus on international and currency ETFs, was an ETF trader at Goldman Sachs, where he made electronic ETF markets. Cafcules, who will focus on fixed income and commodity ETFs, traded ETFs at Goldman Sachs in quantitative fixed income and commodities portfolios.

2) Van Eck Introduces Market Vectors Mortgage REIT Income ETF

New York-based asset manager Van Eck Global announced Wednesday that it has launched Market Vectors Mortgage REIT Income ETF (NYSE Arca: MORT), an ETF offering pure play exposure to the mortgage real estate investment trust (REIT) marketplace.

The new fund is intended to track, before fees and expenses, the performance of the Market Vectors Global Mortgage REITs Index (ticker: MVMORTTR), a capitalization-weighted index that requires constituent companies to derive at least 50% of their revenues from mortgage REITs. This includes companies and trusts primarily engaged in the purchase or service of commercial or residential mortgage loans or mortgage-related securities.

The index had 25 constituents as of July 31, all of which were REITs focused on residential mortgages, commercial mortgages or a mix of both. Unlike other indexes used in mortgage REIT-focused ETFs, the index does not include mortgage finance companies or savings associations.

Mortgage REITs generate income by accessing short-term funding to invest in higher-yielding, long-term mortgage securities and thus are also subject to risks from rising interest rates, since when the spread between short-term and long-term interest rates decreases, the value of a mortgage REITs may decline.

MORT carries a gross expense ratio of 0.54% and a net expense ratio of 0.40%, with expenses capped at 0.40% until May 1, 2013, excluding certain expenses, such as interest. It expects to make quarterly distributions to shareholders.

3) Cannabis Science Receives Prelim 14C Approval from SEC/FINRA

Cannabis Science Inc., a U.S. biotech company developing pharmaceutical cannabis products, announced Wednesday that it received recent notification from the Securities and Exchange Commission that the proposed new class of shares and dividend as detailed in the company's Schedule 14C, filed with the SEC on July 26, is approved for filing as a definitive information statement.

The company's lawyer is in the process of filing the necessary paperwork with the Nevada Secretary of State, FINRA, and the SEC in order to register and obtain approval for the new class of common shares and structure. Upon final approval, the company will issue the special dividend to common shareholders of record as of December 31, 2010.

The new Class A shares would receive a greater amount of any total declared dividend as compared to the Class B shares. Any current shareholders would receive essentially the same dividend before and after the recapitalization, but any new issuances of Class A common stock would have increased dividend participation compared to current shareholders.

4) Gemma Wright-Casparius Joins The Vanguard Group

Vanguard announced Friday that Gemma Wright-Casparius has joined the investment management firm’s fixed income group as a principal and senior portfolio manager.

She reports to Kenneth E. Volpert, principal and head of Vanguard’s taxable bond group, and replaces him as co-manager of the $36.8 billion Vanguard Inflation-Protected Securities Fund. Vanguard principal John Hollyer will continue as co-manager of the fund.

Prior to joining Vanguard, Wright-Casparius, who has more than 30 years of experience in the bond markets, served as a fixed income portfolio manager and deputy head of global macro research and strategy for a subsidiary of the government of Singapore sovereign wealth fund.

In her role as a portfolio manager, she was responsible for an actively managed global inflation-linked bond portfolio. Her previous experience also includes working as director, fixed income research at Barclays Capital, where she developed the firm’s U.S. inflation-linked securities strategy and served as the firm’s liaison with the Board of Governors and the Federal Reserve System on the inflation-linked bond market.

5) First Trust Ringing Opening Bell at NYSE on Aug. 24

Dan Waldron, senior vice president and ETF strategist at ETF provider First Trust, will ring the opening bell at the New York Stock Exchange on Wednesday, Aug. 24, to celebrate the firm’s listing of 14 AlphaDEX ETFs this year. The firm’s proprietary AlphaDEX strategy launched in 2007.

Prior to AlphaDEX, the idea of an ETF generating excess return or being actively managed was a relative unknown, according to the company, which asserted in a release that ETFs were strictly vehicles that delivered benchmark index returns at low cost. First Trust’s AlphaDEX ETFs are quantitatively driven, “beat the market” style, active index funds, the company said.

As of June 30, 10 AlphaDEX ETFs received a 4- or 5-star overall Morningstar rating. First Trust is a fast-growing ETF provider that has grown its assets 42% year to date.

Read last week’s Portfolio Products Roundup at AdvisorOne.com

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