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Top Portfolio Products: Expanded IPO Indexes; New Australian Equity Trust; Filing for Van Eck-HOLDRs Deal

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Vanguard's Latest Price CutsNew products introduced over the last week include an expansion of the FTSE Renaissance IPO Indexes; an Australia-based equity trust introduced by Neuberger Berman; Van Eck filed exchange offer documents on six HOLDRS; and Vanguard switched four funds to all-index and added admiral shares to six others.

In addition, First Trust prepared its Energy Infrastructure Fund for an IPO; Grandeur Peak Advisors will premier two new funds; and Castle Investment Management announced a cut in the expense ratio for its Castle Focus Fund.

Here are the latest developments of interest to advisors:

1) FTSE Renaissance IPO Indexes Expanded to Capture Performance of New Equity Issues Worldwide

Global index provider FTSE Group and IPO research and investment firm Renaissance Capital on Sept. 27 announced the expansion of the FTSE Renaissance IPO Index Series. The series is being renamed the FTSE Renaissance Global IPO Index Series to reflect its new global nature, now providing investors the ability to capture the performance of IPOs listed in 53 new country and regional indices within developed and emerging EMEA, Asian, and American markets.

The series tracks early IPO returns, often missed by most major global IPO benchmarks; many IPOs wait three months or longer for inclusion. The series indices, suitable for creation of ETFs and other structured products, include qualified IPOs at the end of their first trading day. The IPOs are then removed after approximately two years.

2) Neuberger Berman Launches Emerging Markets Equity Trust in Australia

Neuberger Berman announced Sept. 28 that it has launched its first Australian-domiciled unit trust, the Neuberger Berman Emerging Markets Equity Trust, aimed at institutional investors. Australian institutions Intrust Super and Energy Super are its initial investors, with a total of approximately A$100 million in assets. The trust was launched by Melbourne-based Neuberger Berman Australia because of the firm’s emerging markets capability and Australian investors’ interest in such opportunities.

Conrad Saldanha, managing director and New York-based head of emerging markets equities for Neuberger Berman, is the trust’s portfolio manager. Saldanha and his colleagues currently manage approximately U.S.$1.5 billion in emerging markets equity assets for institutional and individual investors worldwide. The team employs a bottom-up, research-driven all-cap securities selection approach, seeking undervalued companies that display characteristics such as industry leadership, management track record and cash flow growth potential.

3) Van Eck Global Files Exchange Offer Documents for 6 Merrill Lynch HOLDRs

Van Eck Global announced Friday that it has filed with the SEC to commence exchange offers for six Merrill Lynch-sponsored HOLDRS: oil services (OIH), semiconductor (SMH), pharmaceutical (PPH), biotech (BBH), retail (RTH) and regional bank (RKH). Van Eck will then offer investors of these six HOLDRS the opportunity to exchange their receipts in these HOLDRS trusts for shares of new market vectors ETFs.

The new ETFs are expected to trade under the corresponding HOLDRS’ ticker symbols. The firm expects the offers to be launched in Q4 of 2011 and consummated later that quarter. They will require proactive action on the part of individual HOLDRS investors. By participating, HOLDRS investors will authorize conversion of stocks in the HOLDRS trusts into a diversified basket of stocks that align with the indices underlying the new market vectors ETFs. The transaction is structured to be an equal-value exchange.

4) Vanguard Lifestrategy Funds Adopt All-Index Approach; 6 Index Funds Add Admiral Shares

The four funds in the Vanguard LifeStrategy series, which currently feature a mix of passively and actively managed funds, will adopt an all-index approach, it was announced Friday. The funds will invest solely in their three broad market component funds (Vanguard Total Stock Market Index Fund, Vanguard Total International Stock Index Fund, and Vanguard Total Bond Market II Index Fund) and gradually eliminate exposure to their actively managed component funds (Vanguard Asset Allocation Fund and Vanguard Short-Term Investment-Grade Fund). Once the transition to the lower-cost index funds is completed, the funds’ expense ratios are expected to decline two to four basis points.

In other news, Vanguard has lowered costs of six index funds by adding admiral shares, which provide shareholders with expense savings of more than 50% over the corresponding investor shares in some cases.

5) First Trust Energy Infrastructure Fund Seeks $345 Million in IPO

RIA First Trust Advisors L.P. announced Thursday the launch of the closed-end First Trust Energy Infrastructure Fund (FIF). Its objective is to seek a high total return with an emphasis on current distributions paid to shareholders. It began trading Sept. 28 on the NYSE. Initially it will raise about $345 million in its common share offering; should underwriters exercise the overallotment option in full, it will raise about $395 million.

First Trust is the fund’s investment adviser, responsible for supervising the fund’s subadvisor, monitoring its investment portfolio, managing its business affairs and providing other administrative services. First Trust, in consultation with the subadvisor, will also be responsible for determining the Fund’s overall investment strategy and overseeing its implementation. Energy Income Partners LLC is the fund’s investment subadvisor, responsible for its day-to-day investment strategy.

6) Former Wasatch Team Launches Grandeur Peak Global and International Opportunities Funds

Grandeur Peak Global Advisors, founded in July by former Wasatch portfolio managers Robert Gardiner and Blake Walker, announced Wednesday that it will launch two mutual funds on Monday, October 17: the Grandeur Peak Global Opportunities Fund and the Grandeur Peak International Opportunities Fund.

The Grandeur Peak Global Opportunities Fund will be a portfolio of global equities with a strong bias towards small- and micro-cap companies. Investments will include companies based in the U.S., developed foreign countries, and emerging/frontier markets. The portfolio has flexibility to adjust its mix by market cap, country, and sector.

The Grandeur Peak International Opportunities Fund will be an equities portfolio focused on small- and micro-cap companies outside of the U.S. The funds will each have two share classes, an investor share class requiring a minimum investment of $2000 and an institutional share class requiring a minimum investment of $100,000, with a 1.25% management fee for both.

7) Castle Investment Management Announces Castle Focus Fund Expense Ratio Reduction

Castle Investment Management, LLC, announced Sept. 26 that it is reducing the expenses of the Castle Focus Fund (MOATX). The expense ratio will be reduced to 1.42% from 1.58% on Nov. 1. The fund is available with no transaction fee on the major mutual fund supermarkets including Schwab, Fidelity and Pershing. As of Sept. 21, the fund was up 0.72% for the year, while its benchmark, the S&P 500, was down 5.8%.

The Castle Focus Fund is subadvised by St. James Investment Company with Robert Mark as portfolio manager, and generally holds 20 to 30 equity positions trading at a significant discount to the portfolio manager’s determination of intrinsic value.

Read last week’s Portfolio Products Roundup at


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