This week, the disgraced SAC Capital Advisors hedge fund shut down after posting 20% gains. New products introduced this week included three ETFs from First Trust and nine new funds from BMO. A social impact partnership among Bank of America Merrill Lynch, New York state and Social Finance Inc. closed.
In addition, Flexible Plan Investments announced that its second Principled Investing Give Back distribution has increased the number of organizations to which it gives by more than 20%.
Here are the latest developments of interest to advisors:
1) SAC Capital Advisors Hedge Fund Gains 20%, Shuts Down
The hedge fund run by Steven Cohen, SAC Capital Advisors, ended its life with gains of more than 20% for the year, according to the figures reported to investors on Dec. 30. That’s despite the firm’s guilty plea to insider trading in November and its bowing to a penalty of $1.2 billion.
While Cohen himself never faced criminal charges, one of the conditions of the plea deal was for him to stop managing money for outsiders and wind down the hedge fund. SAC Capital has already settled with the SEC for $616 million. Cohen still faces an SEC civil action that charges him with failing to properly supervise his employees.
As the firm moves back to family office status, it has also divested itself of SAC Re, its reinsurance group; in December it was announced that the unit would be bought by Hamilton Reinsurance Group.
2) First Trust Announces Launch of Three ETFs
First Trust Advisors L.P. has announced that it will launch three ETFs, the First Trust High Income ETF (FTHI), the First Trust Low Beta Income ETF (FTLB) and the First Trust Nasdaq Rising Dividend Achievers ETF (RDVY).
FTHI seeks to provide current income, with a secondary investment objective of capital appreciation, while FTLB seeks to provide current income. Both will invest in large-cap equities listed on U.S. exchanges, favoring high-dividend-paying common stocks. They will also use an options strategy in which they will write (sell) U.S. exchange-traded covered call options on the S&P 500 Index seeking to generate additional cash flow in premiums on the options that may be distributed to shareholders on a monthly basis. FTLB may use a portion of the options premiums to buy U.S. exchange-traded put options on the S&P 500 Index. This hedging strategy will seek to provide this fund with downside protection and reduce the fund’s price sensitivity to declining markets.
RDVY seeks investment results that correspond generally to the price and yield (before the fund’s fees and expenses) of an equity index called the Nasdaq US Rising Dividend Achievers Index. The index is made up of 50 companies with a history of raising their dividends and that exhibit the characteristics to potentially continue doing so in the future.
Rob Guttschow and John Gambla are senior portfolio managers of FTHI and FTLB. All three are expected to begin trading Tuesday.