The year 2017 is shaping up as a great one for income strategies, especially on the global level, with low interest rate policies prevailing in most developed nations. The ECB and Japan are still practicing the QE policy.
Though the Fed is hiking rates, benchmark bond yields are at subdued levels. This makes the case for dividend investing stronger, as the search of stronger current income will definitely be on.
In fact, many issuers actually rolled out new products in this space, beefing up the number of options at investors' disposal in this key market segment. One such new product is the Principal Active Global Dividend Income ETF (BATS:GDVD), which entered the market in early May and has amassed about $430 million of assets in less than one month.
Let's take a look at what makes this fund so special in the newbie league.
This is an actively managed ETF that looks to invest at least 80% of its net assets, plus any borrowings for investment purposes, in global dividend-paying equity securities. It "invests in equity securities of small, medium and large market capitalization companies and in growth and value stocks," as per the issuer. The fund charges 58 bps in fees.
GDVD allocates its assets to about 60 securities. No holding accounts for more than 2.95% of the basket. Microsoft Corp. (NASDAQ:MSFT), Microchip Technology Inc. (NASDAQ:MCHP) and Taiwan Semiconductor (NYSE:TSM) are the top holdings of the fund.
The fund is evenly spread across the various sectors. Financials (18.13%), Information Technology (15.60%), Consumer Discretionary (11.07%) and Healthcare (10.16%) have a double-digit weight each.
Inside Its Popularity
The ETF could be well suited for investors seeking higher returns from global all-cap stocks with dividend distribution. It is a great way to tap every capitalization and style. Targeting both value and growth stocks on the global front with an active management makes it a dynamic product.
As per the factsheet, the U.S. makes up half of the global stock market value. So, to get access to the other half, one needs to go global. This is especially true given that the foreign markets are putting up a stellar performance right now.
Plus, unlike other active ETFs, this fund charges less. Notably, active funds are expensive, as these involve research expenses associated with the manager's due diligence and additional cost in the form of a wide bid/ask spread beyond the expense ratio.
ETFs That May Come on the Way of its Popularity
There are other funds on the market which offer up exposure to the global, though many are not from the active management space. These funds are the Reality Shares DIVS ETF (NYSEARCA:DIVY) with active management, the SPDR S&P International Dividend ETF (NYSEARCA:DWX) with about $1.19 billion in assets, the PowerShares International Dividend Achievers Portfolio ETF (NASDAQ:PID) with about $805.6 million in assets and the UBS AG FI Enhanced Global High Yield ETN (NYSEARCA:FIHD) with about $762 million in assets.
While these funds may pose threats to this newly launched fund, investors should also note that GDVD's constituents and methodologies are not exactly similar. So, some sort of uninterrupted success can be expected in GDVD until it faces competition from an exactly similar type of fund.