Portfolio > ETFs

New Products, Indices Expand Investor Options in ETF Market

Your article was successfully shared with the contacts you provided.

Thursday was a busy day in the ETF world. Russell Investments and Research Affiliates announced the launch of an index series to provide a "cost-effective alternative" to active management for investors who want access to non-capitalization-weighted products.

“We are excited to merge our benchmark index design expertise with Research Affiliates’ notable research and product knowledge to create the innovative Russell Fundamental Index Series,” said Ron Bundy, managing director for Russell Indexes, in a press release. "For investors seeking an active investment approach, these new indexes will offer much sought-after alternative beta exposures with the transparency, objectivity and broad diversification they have come to expect from the Russell Index family.”

The Russell Fundamental Index Series comprises 24 indices. Russell Investments and Research Affiliates partnered in 2010 to begin working on the indices.

The series will be based on Research Affiliates' Fundamental Index methodology, which selects and weights constituents based on a company’s adjusted sales, retained operating cash flow, and average dividends paid plus share buybacks, instead of market capitalization.  

“Fundamental Index strategies have moved into the mainstream,” said Rob Arnott (left), chairman and CEO of Research Affiliates, in a press release. “Major investors around the world are adding these strategies to improve portfolio efficiency and diversify their core equity portfolios."

Also on Thursday, ETF Securities announced its physical palladium fund (PALL) broke the $1 billion mark as of Feb. 16. Total assets under management for the company's seven ETFs are nearly $4 billion.

William Rhind, head of sales and marketing for ETFS Marketing LLC, noted PALL is the company's second fund to exceed $1 billion in assets, after ETFS Physical Gold Shares (SGOL).

"The interest in both PALL and its sister product, ETFS Physical Platinum Shares (PPLT) may indicate broader investor awareness to gain commodities exposure into more industrial-oriented metals at this juncture,” Rhind said in a statement.

In other ETF news, Factor Advisors, a New York-based asset management firm, launched a family of "spread ETFs," which allow investors to simultaneously hold a bull and a bear position in one leveraged ETF. The FactorShares series began trading Thursday on NYSE Arca.

“As a portfolio manager, I used to become frustrated about being charged twice the transaction fees and double the margin requirements in order to implement spread trades,” explained Stuart Rosenthal, CEO and co-founder of Factor Advisors, in a press release.  “I was determined to bring greater efficiency to spread trading. With the creation of FactorShares, spread trading among the major asset classes requiring two separate positions and indiscriminate rebalancing is in the past.”

The initial ETFs in the FactorShares suite pair major asset classes from the S&P 500 Index, U.S. Treasury Bonds, gold, oil and the U.S. dollar. The funds will rebalance daily and target a daily leverage ratio of 4:1.

The FactorShares ETFs available are:

  • FSE: FactorShares 2X: S&P500 Bull/TBond Bear
  • FSA: FactorShares 2X: TBond Bull/S&P500 Bear
  • FSU: FactorShares 2X: S&P500 Bull/USD Bear
  • FOL: FactorShares 2X: Oil Bull/S&P500 Bear
  • FSG: FactorShares 2X: Gold Bull/S&P500 Bear

Through an agreement with Interactive Brokers, Factor Advisors' brokerage clients can make commission-free trades of FactorShares ETFs with no minimum holding period or short-term fees.