In mid-December of last year a San Diego, CA based ETF issuer known as Reality Shares made its debut with DIVY (Reality Shares DIVS ETF, Expense Ratio 0.85%). The fund has respectably raised approximately $13 million in assets in a relatively short amount of time and raised its ADV above 7,500 shares in what can certainly be categorized as a crowded broader “Large Cap Blend Equity” group in terms of where DIVY potentially fits according to database classification.
There is a “Dividend” focus here though with DIVY, and according to fund literature the strategy “seeks pure-play dividend growth” with our key takeaway being the concept of “Dividend Growth” not just straight Dividend payouts or the usage of some “yield” calculation to determine index components.
In fact, DIVY does not have a “yield”, but should be viewed rather as a capital appreciation vehicle that capitalizes on the growth of dividends over time.
Thus, the fund’s makeup is markedly different from an underlying security standpoint than “Dividend” based Equity ETFs that most may be accustomed to. Rather than selecting individual stocks representative of some Dividend index strategy, DIVY is completely unique in that it, according to fund literature “invests in a combination of listed option contracts, dividend swaps, futures, and forwards on indexes of Large Cap Securities or ETFs designed to track large cap securities.”
We also see an interesting quote from Eric Ervin, President and CEO of RealityShares alluding to the lack of a presence of a clear competitor to it currently in the ETF landscape, a finding of which we would agree with,
especially given the derivatives intensive approach the DIVY portfolio managers employ in their process. He specifically says “
Although DIVY stands alone in the ETF space, this is a strategy that has been around for over 15 years just now it’s in an ETF form.” Underpinning the philosophy is a statement that we see that says “Reality Shares believes that there is a major unanswered need in the investment world for a new way to invest in dividends…One that can deliver the dividend performance of companies, independent of price performance and dividend yield.”