Close to 90 new exchange traded products have come to market this year, but one unique exchange traded fund that debuted in late 2014 is finding sudden success.
Investors are suddenly flocking to the Reality Shares DIVS ETF (NYSEArca: DIVY). For the seven days ended May 15, assets in DIVY surged 50% to nearly $27 million as investors are looking for new ways to damp volatility, according to Reality Shares data.
DIVY is not a traditional dividend ETF. Rather the fund looks to capture dividend growth via an array of strategies in an effort to generate long-term capital appreciation. DIVY’s holdings can include “listed option contracts, dividend swaps, futures and forwards on indexes of Large Cap Securities or exchange traded funds (“ETFs”) designed to track large cap securities indexes,” according to Reality Shares.
The actively managed ETF can purchase index options contracts in an effort to build a portfolio that “is designed to change based primarily on changes in the expected dividend values reflected in the option prices. These option combinations are designed to reflect expected dividend values and eliminate the Fund’s exposure to changes in the trading prices of the Large Cap Securities,” according to Reality Shares. [A New Dividend Growth ETF]
While DIVY is not a traditional dividend ETF, its strategy does help investors access the positive effects of a stock’s dividend growth. Isolating a company’s dividend growth rather than focusing on simple share price movements can produce solid long-term results.
DIVY does not capture actual dividend payments. The ETF’s holdings are usually comprised of call and put options on major indexes such as the S&P 500 and the Nasdaq-100.