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Portfolio > Portfolio Construction

Top Portfolio Products: Facebook IPO Exposure Available in ETF

By Marlene Y. Satter

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Portfolio Products logoNew products introduced over the last week include an ETF that will offer exposure to the vaunted Facebook IPO.

In addition, Franklin Square closed FSIC to investors and prepared its successor, FSIC II, for its own IPO on June 1, and Russell Investments’ index reconstitution process adds tech IPOs within four months of debut.

Here are the latest developments of interest to advisors:

1) Global X Social Media and First Trust ETF to Offer Facebook IPO Exposure

As demand skyrockets for Facebook’s (FB) new shares, which began trading Friday, advisors are planning to snap up exchange-traded funds that can give their clients exposure to the hot new social media IPO without exposing them to the stock’s expected initial volatility.

The two ETFs that will offer exposure to Facebook within the first trading week of its launch are the Global X Social Media Index ETF (SOCL) and the First Trust US IPO Index Fund (FPX), according to Scott Freeze, president of Street One Financial, a broker-dealer that works with ETF issuers, money managers and registered investment advisors (RIAs) of $13 billion to $20 billion in assets to identify ETFs that provide the desired mix of manager objectives, fees and liquidity.

“We have seen a huge amount of interest,” Global X Funds CEO Bruno del Ama told AdvisorOne in an interview on Wednesday. “We brought the fund to market in November 2011, and demand was slow when it first came to market, but following the announcement of the Facebook IPO it really took off, and we’ve had many inquiries from the financial advisor community. SOCL is an open-end ETF. Anybody with a brokerage account can buy it, and it trades like any other stock.”

Read the entire story, How to Buy Facebook Without All the Risk, at AdvisorOne.

2) Eligible Tech IPOs to be Added at Russell Reconstitution

Russell Investments announced Wednesday that Russell’s systematic IPO process, added to the Russell Index methodology in 2004, allows for the Russell indexes to precisely reflect the returns of technology companies as they go public, within four months of their IPOs. In the last year, Russell has added 23 technology IPOs during reconstitution and the quarterly IPO additions.

The technology sector of the Russell 3000 Index, which returned 11.6% year-to-date as of May 15th, includes many of the well-publicized technology IPOs of the past year. Through Russell’s methodology, companies such as LinkedIn, Pandora, Groupon and Zynga were added to their respective Russell Index family cap tiers as of April 2012. The Russell indexes’ rules-based methodologies seek to identify and include eligible IPOs worldwide on a quarterly basis to comprehensively and objectively measure the investible equity universe.

While the first-, third- and fourth-quarter IPOs are added to the Russell indexes around the last day of the last month in the quarter, second-quarter IPOs are added to the Russell indexes at the annual Russell Index reconstitution in June. Eligible technology companies that have gone public between March 1 and May 31 will be added during the reconstitution process completed June 22.

3) Franklin Square Closes FSIC to New Investors, Prepares FSIC II for June

Franklin Square Capital Partners announced Wednesday that FS Investment Corp. (FSIC) successfully completed its offering and closed to new investors after raising more than $2.5 billion in capital. FSIC was the first publicly registered, nontraded business development company (BDC). Since its IPO in January 2009, FSIC has generated a consistent annualized yield in excess of 7%, strong capital appreciation and a cumulative return of 72.5% through March 31, 2012.

Franklin Square expects to commence the IPO for its successor fund, FS Investment Corporation II (FSIC II), on June 1. FSIC II will employ substantially the same investment strategy and investment team as FSIC. Its investment objective will be to generate current income and, to a lesser extent, long-term capital appreciation, with a focus on downside protection, by investing primarily in the senior secured debt securities of private U.S. companies.FS2 Capital Partners LLC (a member of FINRA and SIPC), an affiliate of Franklin Square, will be the dealer manager for the FSIC II offering. Up to 200 million shares of common stock of FSIC II will be available in the public offering at an initial offering price of $10 per share. Shares for individual investors will be made available through registered broker-dealers and their financial representatives. A copy of the prospectus may be found on at www.FSInvestmentCorpII.com.

Read the May 14 Portfolio Products Roundup at AdvisorOne.

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