Chinese Tiger

USA

Chinese fintech Tiger Brokers lists first ETF

Tiger Brokers, a Beijing-based fintech backed by Wall Street billionaire Jim Rogers, is entering the US market and listing its first ETF under its TigerShares sub-brand. The TigerShares China-US Internet Titan ETF (TTTN) will track an index of the 10 largest publicly-traded Chinese internet companies and the 10 largest publicly-traded US internet companies. Companies are weighted by market cap, but their weights are modified at each rebalance so that:

  1. the aggregate weight of the Chinese companies is close to the weight of the US companies;
  2. no company takes more than 10% of the index.

The US internet giants have to be taken from the Nasdaq Internet Index, the prospectus says. While the Chinese internet giants can be listed on any US or Chinese exchange. Reading through the prospectus it looks like day-to-day portfolio management will be outsourced to two advisers based in the US: Wealthn, the fund’s adviser, and Vident, the subadvisor.

 

Analysis – bad timing

As we all know, timing the market is hard. But whether ETF providers like it or not, their new listings are always, in a way, at the mercy of market timing. Because every advisor and his dog look at recent performance when picking funds (they’re not meant to, but like mice at a mouse trap they do anyway) those ETFs that have had a run of bad luck at the time of listing can be in for a rough time.

China stocks have been declining of late. So have internet companies. With discount rates getting revised upwards as the Fed raises rates, internet growth companies are having their valuations written down. A dollar tomorrow is worth less than a dollar today, every finance textbook instructs. And with discount rates only set to go even higher, a dollar tomorrow will soon be worth much less than a dollar today. This is a problem for internet companies as much of their valuations are based on what they’re modeled as earning in the future (enter Amazon).

We’re bullish on China and the internet. But the timing of this listing won’t help.

 

AAM lists dividends + free cash flow

Colorado-based mutual fund provider Advisors Asset Management (AAM) is listing a new smart beta ETF that targets dividends and value. The AAM S&P Developed Markets High Dividend Value ETF (DMDV) will track the S&P Developed Ex-US Dividend and Free Cash Flow Yield Index, which screens companies in rich countries for high dividends and large chunks of free cash flow.

Companies with the top five highest scores based on those criteria in each GICS sector will be put in the index. The index is equally weighted and caps the number of companies one country can contribute at 13.

The fund is AAM’s third ETF that uses free cash flow, and one of almost 10 US ETFs listed in the past six months that focus on this variable (we’re noticing a trend…). DMDV will rebalance twice a year.

 

Analysis – tax, old people and advisors

DMDV has a neat and simple investment strategy. It is created with advisors in mind and hopes to provide older investors with a sustainable income solution. Meshing free cash flow with dividend yield, we believe, is sensible as it ensures that the dividend yield is not being jacked up by companies binging on debt.

 

If we had a question for DMDV it would be tax related. Investing internationally is great but it comes with the challenge of withholding tax. Foreign investors often look at the Australian and Canadian markets with an eyeball on their higher dividend yields. Yet they sometimes forget that their dividends are high for Australians and Canadians – everyone else has to give up 15% of the dividend cheque in tax.

 

Cross-listings

London

Newly acquired by VanEck, Think ETF is cross-listing a raft of its plain vanilla funds over to London. The new listings will be available in both euros and pounds.

  • Think Global Equity UCITS ETF (TGET, TGGB)
  • Think Global Real Estate UCITS ETF (TRET, TREG)
  • Think iBoxx Corporate Bond UCITS ETF (TGBT, TGBG)
  • Think iBoxx AAA-AA Government Bond UCITS ETF (VAAA, TAGB)
  • Think Sustainable World UCITS ETF (TSWE, TSGB)
  • Think European Equity UCITS ETF (TEET)
  • Think Morningstar North America Equity UCITS ETF (TNAE TNGB)
  • Think Morningstar High Dividend UCITS ETF (TDIV, TDGB)