Kansas-based Ivy Investments has introduced its first three Ivy ‘NextShares’ exchange-traded managed funds, making the firm among the first to offer the new non-transparent ETF structure. The three Ivy NextShares ETFs all invest in US equities while separately targeting stocks in the energy sector, those with growth characteristics, or those with value attributes.
NextShares are classed as a hybrid between an actively managed fund and an ETF.
NextShares are classed as a hybrid between an actively managed mutual fund and an ETF. They protect and harness the manager’s proprietary research in a bid to obtain benchmark-beating returns, while simultaneously enjoying intraday tradability. All trades of the fund are finalised at day’s end with prices reflecting the fund’s Net Asset Value plus or minus a trading cost (premium/discount) that was established at the time the trade was executed. This intraday tradability allows the funds to maintain significant cost and tax advantages usually associated with ETFs.
The first NextShares products were launched by Eaton Vance Corp. in February of this year.
Thomas W. Butch, president and CEO of Ivy Distributors, commented: “NextShares represent another step in our effort to provide clients with unique, progressive investment products. We are pleased to be one of the first firms to bring them to market. Ivy NextShares offer the potential for competitive investment returns by applying the strength of Ivy’s experienced portfolio managers and proprietary investment research in a cost-effective and tax-effective structure.”
“We congratulate Ivy on the launch of their three NextShares funds,” added Stephen W. Clarke, president of NextShares Solutions.“Ivy is leading the evolution of active fund investing to a potentially better-performing, lower cost and more tax efficient structure.”
Energy
The Ivy Energy NextShares (Nasdaq: IVENC) invests at least 80% of its net assets in securities of companies within all aspects of the energy sector (including alternative energy sources) such as exploration, discovery, production, distribution or infrastructure. The portfolio typically holds 50 to 65 stocks.
The ETF focuses on long-term fundamentals that drive stock performance and long-term secular change. It seeks potential opportunities around the world including those based on demand in emerging markets, such as China and India. Current themes include a focus on US shale oil and supporting companies.
The fund’s benchmark is the S&P 1500 Energy Index, composed of those companies within the S&P 1500 Index (representing approximately 90% of the US market capitalization) that have been classified as belonging to the energy sector.
Its total expense ratio (TER) is 0.95% due to fee waivers in place until November 2017. Its gross expense ratio is 1.88%.
Growth
The Ivy Focused Growth NextShares (Nasdaq: IVFGC) invests primarily in a portfolio of common stocks issued by large capitalization, growth-oriented companies that the manager believes have the ability to sustain growth over the long term. The portfolio typically will maintain a limited number of stocks, generally between 15 and 25.
Utilising a concentrated, low turnover portfolio, the fund focuses on businesses that the manager believes can preclude and mitigate competition through identifiable competitive advantages. A bottom-up stock process seeks to identify companies with higher growth rates, higher profitability, lower debt to capital ratios and lower dividend yields relative to their peers.
The fund’s benchmark is the Russell 1000 Growth Index, composed of those companies in the Russell 1000 Index (representing approximately the highest 90% of the US market capitalization) with strong growth characteristics.
Its TER is 0.78% due to fee waivers in place until November 2017. Its gross expense ratio is 1.18%.
Value
The Ivy Focused Value NextShares (Nasdaq: IVFVC) invests primarily in the common stocks of companies that the manager believes are trading at a significant discount relative to their intrinsic value, and have a favourable long-term outlook for capital appreciation. The portfolio typically will maintain a limited number of stocks, generally between 15 and 25.
Investing primarily in equities resides in the 2nd/3rd decile of dividend yield, the portfolio will typically also provide an above average dividend yield.
The fund’s benchmark is the Russell 1000 Value Index, composed of those companies in the Russell 1000 Index with strong value characteristics.
Its TER is 0.78% due to fee waivers in place until November 2017. Its gross expense ratio is 1.33%.