Just in Time for Twitter, New IPO ETF Debuts
October 16th at 11:03am by Tom Lydon
With reports out Wednesday that a roadshow is imminent and that social media darling Twitter could be trading on the New York Stock Exchange sometime next month, some investors might want to look at ETFs that could house shares of Twitter.
One debuted Wednesday, the Renaissance IPO ETF (NYSEArca: IPO). Connecticut-based Renaissance also issues the actively managed Global IPO Plus Aftermarket Fund (IPOSX) mutual fund.
“The launch of the Renaissance IPO ETF, is a direct response to increased investor demand for systematic exposure to newly listed IPOs in a low-cost tax-efficient exchange-traded structure,” said Kathleen Smith, Chairman of Renaissance Capita, in a statement. “When added to core U.S. equity holdings, a portfolio of unseasoned publicly traded equities provides investors with more comprehensive exposure to the full set of U.S. public equities.”
IPO, which has an annual expense ratio of 0.6%, tracks the Renaissance IPO Index. “As of September 30, 2013, top holdings in the index include an 11.0% position in leading social network Facebook (NasdaqGM: FB), a 9.8% position in global luxury fashion brand Michael Kors Holdings (NYSE: KORS), and a 4.5% position in cloud-based HR platform Workday (NYSE: WDAY),” according to the statement.
Another index members include Delphi Automotive (NYSE: DLPH), Realogy Holdings (NYSE: RLGY) and Splunk (NasdaqGM: SPLK).
IPO has a director competitor in the form of the First Trust US IPO Index Fund (NYSEArca: FPX). FPX has been successful in its own right, but there are key differences between the two funds. [New IPO ETF to Roll Out Soon]
For example, FPX does not always add new IPOs to its lineup right away. In theory, Twitter could go public on November 15 and not find its way into FPX for a couple of months.
“Newly public companies are typically included in equity market indices on a delayed basis, until they become seasoned in trading markets. Once included, these companies are underrepresented in core equity portfolios. Using a portfolio of unseasoned newly public companies to complement core equity benchmarks, investors can obtain more comprehensive exposure to the total equity market,” according to Renaissance.
The firm noted it took an average of 123 days after their IPOs for LinkedIn (NYSE: LNKD) and Visa (NYSE: V) to be added to the Russell 3000. Linked is still not a member of the S&P 500.
FPX can also hold stocks for up to 1,000 past the IPO date. The Renaissance Capital ETF limits holdings to a two-year stay. Both ETFs cap holdings at a 10% weight.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.