What would Larry think?

USA

iShares lists actively managed inflation-proof corporate bond ETF

iShares is listing an actively managed investment-grade corporate bond ETF that uses derivatives to reduce inflation. The iShares Inflation Hedged Corporate Bond ETF (LQDI) will invest, interestingly, mostly in another iShares ETF: the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD). And will invest around 80% of the fund’s assets in the other iShares ETF, the prospectus says.

 

LQDI then uses in choice derivatives to reduce any impact of inflation, which is where the active management comes in. The fund will “primarily” use inflation swaps to achieve this, although it can also use other derivatives including total return swaps, credit default swaps and US Treasury futures alongside inflation swaps, the prospectus says.

 

I could not find the name of the swap counterparty in the prospectus.

Analysis – what would Larry Fink think?

Larry Fink once slammed leveraged ETFs as a threat to global financial stability, citing their structure and their use of derivatives in particular. Yet LQDI seems quite similar to the very leveraged ETFs Mr Fink criticised. LQDI gets its asset class exposure using another ETF, just like some leveraged ETFs. It then uses a swap structure to enhance exposure – again, just like leveraged ETFs. 

One wonders what Larry Fink would make of this listing. Or maybe he’s just changed his mind. 

 

What… is… First Trust… doing…?

In a very strange and perhaps unique move, First Trust is transforming its AlphaDex Taiwan ETF into an equally weighted NIFTY 50 tracker. Rather than simply launch a new ETF to track India’s biggest index on an equal-weighted basis, First Trust has chosen to cannibalise an existing Taiwan product. The new fund will be called First Trust India NIFTY 50 Equal Weight ETF (NFTY).

 

A press release issued by First Trust on the subject offers little explanation for the change up. It only says that shareholders had “voted to approve a new investment objective”.

 

We are seeking to contact the issuer.

 

London

VanEck likes mines

VanEck is listing a new ETF that targets global mining companies, and builds on its gold miners product. The Vaneck Vectors Global Mining UCITS ETF (GDIG, GIGB) will track global companies in energy, metals and mineral extraction, gold and diversified natural resources.

 

Judging by the GDIG’s factsheet (available here), the product will be most exposed to Australian, Canadian and American companies, as one might have expected. The factsheet says that the UK will make up 15% of the index’s weight, although that weighting appears to be an optical illusion, as much of the “British” weight comes from Australian companies BHP and Rio Tinto being joint-listed on the LSX.

 

Companies will be weighted by market capitalisation. GDIG will charge 0.50%.

 

Taiwan

Fuh Hwa lists smart beta High dividend Low volatility ETF

Fuh Hwa securities, one of Taiwan’s biggest ETF providers, is listing a new smart beta ETF, the Fuh Hwa FTSE Taiwan High Div Low Vol ETF (00731), that guns for high dividends and low volatility. It does this via the FTSE Taiwan High Dividend Low Volatility Index.

 

China

Another Chinese issuer wakes up to MSCI A Shares inclusion

Another Chinese issuer is listing a new ETF in response to MSCI’s A Shares update (see yesterday’s coverage for something very similar.) The Hutai-PineBridge MSCI China A-share Guojitong ETF (512520) will track MSCI China A Shares companies.