By Murray Coleman
This piece was initially posted on IndexUniverse on July 6.
The $597.6 billion exchange-traded funds market has grown over the past several years to include everything from commodities and alternative assets to portfolios specializing in tiny countries.
But coming soon could be an ETF that takes niche investing to another level. Oklahoma City-based TXF Funds Inc. is requesting that the Securities and Exchange Commission allow it to launch an ETF focused on the largest public companies in Texas.
The initial request is only for the TXF Large Companies ETF. It’s designed to track the SPADE Texas Large Companies Index. The fund would trade on the NYSE Arca and come with annual gross operating expenses of 0.85%.
The benchmark weights constituents by market capitalization sizes, although positions are modified to conform with liquidity restrictions and a cap of no more than 10% for any single name. The index is rebalanced monthly.
The proposed fund and subsequent ETFs would use benchmarks developed by ISBC/SPADE Indexes LLC. It already is involved in the ETF marketplace. The PowerShares Aerospace and Defense Portfolio (NYSE: PPA) is based on an ISBC/SPADE index.
The provider has also created a benchmark tracking Oklahoma-based companies. On its Web site, SPADE lists that index licensed to OOK Oklahoma ETF Inc. and a proposed ETF ticker of “OOK.”
In a filing dated June 23, TXF Funds also makes it clear more state-specific ETFs are in the works. “The company is considering offering TXF shares in two additional Funds, TXF Mid Companies and TXF Small Companies, each of which will invest in separate portfolios of securities that substantially replicate benchmark indexes consisting of medium and small Texas-based companies that are publicly traded,” the firm wrote.
In each case, the funds will be either headquartered in Texas or “generate a significant portion of their revenues in Texas,” the document added.
TXF Funds would serve as sponsor. Another Oklahoma City firm, OOK Inc., would serve as the adviser. Its parent is controlled by the Geary Cos., which also owns regional brokerage Capital West Securities. Original requests for the funds were made earlier this year.