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Portfolio > Portfolio Construction

An ETF Fashioned for a Trade War

By Elena Popina

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(Photo: Shutterstock)

There’s a new way to play the trade war: a dedicated exchange-traded fund.

M-CAM International is starting an ETF that will invest in companies it calculates are best able to withstand a trade rift, regulatory filings show. The Innovation Alpha Trade War ETF, which will hold about 120 global large- and mid-cap stocks, is set to start trading on Wednesday under the ticker TWAR, according to David Martin, M-CAM’s chief executive officer and chairman.

Many investors have been derailed by the ebb and flow of U.S. trade tensions with countries including China, Mexico, India and Canada. M-CAM will look at a company’s contracts with the U.S. or an international government to determine which stocks could outperform during a trade war thanks to state support. These companies will comprise the fund’s benchmark, but only firms with strong intellectual property — as defined by M-CAM — are eligible.

“There are going to be companies where their technology is, in many respects, insulated from the effect of a trade war by virtue of historical relationships or government patronage,” Martin said by phone. “The market should have visibility” of these stocks, he said.

The ETF’s index includes International Business Machines Corp. and Cisco Systems Inc. among its largest constituents; both companies disclose some of their federal contracts on their respective websites. Multinational companies from countries such as Germany, Brazil, China and Mexico are also in the benchmark.

The fund will charge a management fee of 0.81% per year, or $8.10 for every $1,000 invested in the product. That’s almost 10 times more than the SPDR S&P 500 ETF Trust, the largest exchange-traded fund.

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