An industry veteran and a newcomer have ramped up activity on the product development front during an otherwise quiet week before the holiday weekend. ProShares filed with the SEC for a lineup of new equity ETFs that are calibrated to deliver a specific level of volatility depending on market conditions,while New York-based Yorkville ETF Advisors is planning to bring to market their first exchange-traded fund through Exchange Traded Concepts.
Better known for their lineup of leveraged and inverse products, industry giant ProShares has laid down the groundwork for an intriguing covered bond fund (see SEC Filing):
- ProShares USD Covered Bond: This ETF will be designed to track the USD Covered Bond Index, which is comprised of U.S. dollar-denominated fixed income securities. The underlying holdings are “Covered Bonds” which are debt instruments issued by a financial institution that are secured by a pool of financial assets, most commonly through a “cover pool” of mortgages or public-sector loans. Covered bonds also distinguish themselves from traditional debt securities because the bondholders have a senior claim against the cover pool in the event of a default by the issuing financial institution (see Better-Than-AGG Total Bond Market ETFdb Portfolio). This ETF will consists of fixed-rate covered bonds that meet certain time to maturity criteria and have the highest rating in each of Fitch, Moody’s and Standard & Poor’s rating categories.
ProShares is also planning to launch a suite of “volatility target” ETFs that will be linked to popular indexes, with the twist being that the funds will effectively de-leverage when volatility in the respective index is relatively high by increasing exposure to three-month U.S. Treasuries. Likewise, the funds will also maintain the flexibility to ramp up leverage when volatility conditions are deemed to be favorable by decreasing exposure to U.S. Treasuries. Each of the ETFs profiled below will be leveraged, rebalanced daily and have a volatility target of 15%, meaning that they will increase or decrease exposure to U.S. Treasuries when the realized volatility of their respective indexes is greater than 15% and vice versa (see SEC Filing):
- ProShares Nasdaq 100 – 15 % Volatility Target: This ETF will seek to provide dynamic exposure to stocks of the Nasdaq-100 Index.
- ProShares Dow 30 – 15% Volatility Target: This ETF will seek to provide dynamic exposure to stocks of the Dow Jones Industrial Average.
- ProShares Russell 2000 – 15% Volatility Target: This ETF will seek to provide dynamic exposure to stocks of the Russell 2000 Index.
- ProShares Russell 1000 – 15% Volatility Target: This ETF will seek to provide dynamic exposure to stocks of the Russell 1000 Index.
- ProShares MSCI EAFE – 15% Volatility Target: This ETF will seek to provide dynamic exposure to stocks of the MSCI EAFE Index.
- ProShares MSCI Emerging Markets – 15% Volatility Target: This ETF will seek to provide dynamic exposure to stocks of the MSCI Emerging Markets Index.
- ProShares S&P MidCap400 – 15% Volatility Target: This ETF will seek to provide dynamic exposure to stocks of the S&P MidCap 400 Index.
Yorkville is planning to debut its first product with the help of Exchange Trade Funds, a new firm launched to assist would-be issuers with getting ETFs to market (see SEC Filing):
- Yorkville High Income MLP ETF (NYSEARCA:YMLP): This ETF will seek to track the price and yield performance of the Solactive High Income MLP Index. Its holdings will consists of MLPs in the energy sector, involved in the production of oil and natural gas, as well as firms involved with the extraction and distribution of other natural resources such as fertilizers, coal and timber.
Disclosure: No positions at time of writing.
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