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Two new WisdomTree funds have chosen the Texas Stock Exchange as their home. Their prospectuses then rule out any stock that is not listed on the New York Stock Exchange or Nasdaq.
WisdomTree Efficient Long/Short U.S. SmallCap Equity Fund (WSLS, Texas Stock Exchange)
The Texas Stock Exchange is a young venue, and its first ETF listings had a local feel: Texas equities, Texas oil and a Texas bank. Trade press reported that WisdomTree was choosing the venue for "one of its" funds and noted that the firm had not confirmed it. The summary prospectuses say there are two, and both name "the Texas Stock Exchange LLC" right in the title line.
The small-cap fund is the more conventional of the pair, by the standards of funds that short things with swaps. Half of it is a long-only basket of US small caps, weighted by market capitalisation. The other half is a long/short sleeve of 100 to 300 longs and 100 to 300 shorts, typically "100% long positions and approximately 90% short positions". A third-party machine-learning model picks the stocks. Newton Investment Management North America is the sub-adviser, and it "retains discretion" over whether to act on what the model says. The fee is 0.88%.
Then come the eligibility rules. To get into the portfolio, a company must fall outside the 1,000th largest US-listed companies, trade more than $3 million a day, and be "listed on the New York Stock Exchange or The Nasdaq Stock Market LLC". The fund has made the journey to Texas. Its holdings are not allowed to follow.
None of this is a contradiction, exactly. A fund's own listing venue and its investment universe have nothing to do with each other, and the prospectus is simply describing where the liquidity lives today. But it does capture where a new exchange starts: it can win the wrapper long before it wins anything inside it.
WisdomTree Global Alpha Fund (WTAL, Texas Stock Exchange)
If WSLS is the cautious one, WTAL is the sibling that read the same prospectus and turned every dial up. It is a long/short global equity strategy with no long-only sleeve at all, "typically" running "200% long and approximately 180% short". That works out at 380% gross exposure, in a fund whose net exposure to the market is around 20%. It costs the same 0.88% as its small-cap counterpart.
The portfolio is split into a US basket and a non-US basket, each with 300 to 600 positions, and no more than 60% of assets may sit in US issuers. US candidates must rank among the top 2,000 US-listed companies, trade above $20 a share and, once again, be listed on the NYSE or Nasdaq. Non-US candidates need a market capitalisation of at least $1 billion. Any stock considered for shorting must cost less than 10% to borrow.
The risk section rewards a careful reader. Alongside the expected warnings about mid- and large-caps, it includes a small-cap risk paragraph saying the fund "invests primarily in the securities of small-capitalization companies". A fund that can hold anything in the top 2,000 at home and anything above $1 billion abroad will own some small caps, but "primarily" seems a stretch. The paragraph reads as if it wandered across from the sibling filing. When two prospectuses share a sub-adviser, a model provider and a fee, they apparently share some paragraphs too.
The Amundi thematic trio (CR1T, ACDC and SP4C, Euronext Paris)
Amundi has listed three new global thematic ETFs in Paris, covering critical materials and rare earths, electrification infrastructure and space technology. Each theme already has a shelf of competitors in Europe, and the space shelf in particular has been filling up fast. Amundi's advantage in these races has always been price and distribution rather than arriving first.
The electrification fund has the ticker ACDC. Whoever chose it deserves a small bonus. It is both an accurate description of the theme (alternating current, direct current) and a guarantee that every retail investor searching for it will first find a rock band.
The BMO trio (ZCRB, ZEMB and ZLAT, Toronto Stock Exchange)
I recently wrote about BMO's leveraged fund betting on and against consumer staples. Its latest additions are calmer. Two of them, ZCRB and ZEMB, are ETF series of existing BMO mutual funds: BMO Core Bond Fund, which invests mainly in Canadian-dollar investment-grade debt, and BMO Emerging Markets Bond Fund. The portfolios already exist. Only the share class is new.
ZLAT is the more interesting one. It tracks an MSCI Latin America index weighted by GDP rather than by market capitalisation. That changes the question the index answers. Instead of asking which listed companies are biggest, it asks which economies are biggest. In a region where a few stock markets dominate the cap-weighted benchmarks, that means a different country mix, though not necessarily a smaller weight for the region’s largest economy.
There is a small irony in the emerging markets fund: BMO already sells an index-tracking emerging markets bond ETF, and it now also offers an actively managed one as an ETF series. Investors who could not decide between active and passive in this asset class no longer have to, because BMO will sell them both.
Vanguard USD High Yield Corporate Bond UCITS ETF (VUYD and VUYA, Euronext Amsterdam)
Vanguard has listed two share classes of a USD high-yield corporate bond UCITS ETF in Amsterdam. The tickers suggest one distributing class and one accumulating class. Vanguard already runs a US-listed high-yield corporate bond ETF, VCHY, with an expense ratio of 0.05% and a benchmark that caps any single issuer at 2%. The firm has not yet said how closely the European version follows it.
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