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BlackRock's iShares, Schwab Adding International Equity ETFs: Portfolio Products

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What You Need to Know

  • iShares BlackRock’s has launched the iShares International Developed Small Cap Value Factor ETF (ISVL).
  • Schwab plans to introduce an International Dividend Equity ETF (SCHY) on or around April 29.
  • John Hancock will liquidate its Alternative Risk Premium fund on May 10.

BlackRock’s iShares has launched the iShares International Developed Small Cap Value Factor ETF (ISVL), which tracks the FTSE Developed ex-US ex Korea Small Cap Focused Value Index.

The ETF, which has a net expense ratio of 0.30%, is intended to take advantage of the rally in value stocks, both domestically and internationally, which began in November 2020 after Pfizer and partner BioNTech SE became the first companies to announce the development of a highly effective coronavirus vaccination.

ISVL complements iShares International Developed Small Cap Value Factor ETF (ISVL) introduced in October 2020 and is supported by growing investor interest in international markets, according to BlackRock. iShares saw about $1.7 billion in its international single factor suite in 2020, a 70% increase from 2019, according to BlackRock.

Bob Hum, U.S. head of factor ETFs at iShares, said in a statement that ISVL was “the first iShares ETF to specifically target small cap value exposure in international markets” and can “can meet the growing demand for pro-cyclical exposure that can potentially benefit from a reopening of the economy post-COVID 19.”

Schwab Plans Low-Cost International Dividend ETF

Charles Schwab Investment Management (CSIM) expects to launch the low-cost Schwab International Dividend Equity ETF (SCHY) on or around April 29.

The ETF will track the Dow Jones International Dividend 100 Index and have an operating expense ratio of 0.14%, among the lowest cost of any similar product from other asset managers. (The Vanguard International High Dividend Yield Index ETF, based on the FTSE All-World ex U.S. High Dividend Yield Index, has a net expense ratio of 0.28%.)

“We continue to see a spike in demand for dividend equity funds,” said David Botset, senior vice president of product strategy for CSIM, in a statement. He  noted that the 10,000 baby boomers turning 65 every day, as well as other investors, are seeking income strategies as part of diversified portfolios.

John Hancock to Liquidate Alternatives Fund

John Hancock will be liquidating the John Hancock Alternative Risk Premium fund on May 10. It closed the fund to new investorsThursday.

According to an SEC filing, the fund’s board “determined that continuation of the fund is not in the best interests of the fund or its shareholders as a result of factors or events adversely affecting the fund’s ability to conduct its business and operations in an economically viable manner.”

The actively managed fund, launched in December 2019 had accumulated $124.34 million in assets as of March 25. It was designed to hold both long and short positions within a variety of asset classes globally including equities, bonds, foreign currencies and commodities as well as ETFs.

SoFi to Offer Members Access to IPOs

Digital advisory firm SoFi, which has been rapidly expanding into new services and has plans to go public via a SPAC, has said it will be offering users on its SoFi Invest platform the ability to invest in initial public offerings (IPOs), which have traditionally been limited to large institutional investors and ultra-high net worth individuals.

The SoFi offering will be available to SoFi Active Invest users who have at least $3,000 in total account value across all of SoFi Invest accounts.

“SoFi anticipates offering several initial public offering securities in the coming months available to SoFi Invest members through the SoFi app,” according to the press release.

Innovator ETFs to Launch a New Suite of Defined Outcome ETFs

Innovator ETFs is launching a new suite of six defined outcome ETFs, known as Accelerated ETFs, which offer two to three times the gains of the the SPDR S&P 500 ETF Trust (SPY) and the Invesco QQQ Trust (QQQ), up to a cap over a one-year or three-month period.

SPY and QQQ track the S&P 500 and Nasdaq-100 indexes, respectively.

The Accelerated ETFs are expected to launch Thursday on the Cboe, with a net expense ratio of 0.79%.

Innovator ETFs makes the point that the funds are not leveraged ETFs but rather “asymmetric” ETFs because their downside is limited to the actual (1X) loss of the benchmark index. It also notes that the ETFs have the potential for outperformance when the reference asset returns less than the ETF’s cap.

Four of the new ETFs are based on the large-cap U.S. equity market through options on the SPDR S&P 500 ETF Trust:

  • Innovator U.S. Equity Accelerated ETF (XDAP): with double the upside performance of SPY, up to a cap and approximately 1x downside exposure over a one-year outcome period
  • Innovator U.S. Equity Accelerated 9 Buffer (XBAP): double the upside performance of SPY, up to a cap, with approximately 1x downside exposure plus a buffer against the first 9% of losses in SPY, over a one-year period
  • Innovator U.S. Equity Accelerated ETF (XDSQ): double the upside performance of SPY, up to a cap, with 1x downside exposure over a three-month period
  • Innovator U.S. Equity Accelerated Plus ETF (XTAP):  triple the upside performance of SPY, up to a cap, 1x downside exposure over a one-year outcome period

Two of the new ETFs are based on growth stocks through options on the Invesco QQQ Trust:

  • Innovator Growth-100 Accelerated ETF (XDQQ): with double the upside performance of QQQ, up to a cap, 1x downside exposure, over a three-month period
  • Innovator Growth-100 Accelerated Plus ETF  (QTAP):  with triple the upside performance of QQQ, up to a cap,1x downside exposure, over a one-year period

FTSE Russell Introduces Fixed Income Core Infrastructure Index

FTSE Russell has launched the FTSE Fixed Income Core Infrastructure Index as a complement to its equity infrastructure index services, to meet growing investor demand.

The new fixed income infrastructure  index is designed to serve as a benchmark measure and the basis for investment portfolios, according to the London Stock Exchange Group, the parent company of FTSE Russell.

In an accompanying research paper, FTSE found that combining listed equity and fixed income infrastructure in a single portfolio improves its risk and return profile compared to a pure infrastructure fixed income or equity portfolio.

David Craig, Group Head, Data & Analytics, LSEG, noted in a statement that LSEG’s research “shows that the number of global infrastructure projects continued to grow in 2020, despite the COVID-19 pandemic” [and] that “the reopening story for global markets and a return to mobility collectively point to a continued focus on infrastructure spending,”

He said the new index will help “clients broaden their global investment toolkit for this very important and growing asset class.”

Check out last week’s portfolio product roundup here:  T. Rowe Price Launches Its First Impact Fund: Portfolio Products

(Photo: Bloomberg)

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