On Wednesday, Exchange Traded Concepts (ETC) announced, in conjunction with North Shore Indices, the launch of the North Shore Dual Share Class ETF (NYSE: DUAL).
“We are proud to expand our relationship with North Shore by offering a second ETF with the firm,” said J. Garrett Stevens, CEO of Exchange Traded Concepts, referring to the North Shore Global Uranium Mining ETF (NYSE: URNM), which launched December 2019. “We believe that DUAL offers investors exposure to a non-traditional source of alpha1 that is not readily available in other investment products,” Mr. Stevens went on to note.
DUAL seeks to provide investment results that, before fees and expenses, generally correspond to the total return performance of the North Shore Dual Share Class Index. The Index is designed to track the performance of dual-class companies listed in the United States. Dual-class companies issue at least two shares to the public – one to the general public with either limited or no voting rights and one for the company’s founders and executives which possess most, if not all, of the voting rights.
“Visionary founders of young, innovative companies may utilize the dual-class structure so as to gain access to the public markets without giving up control of their companies,” noted Tim Rotolo, Founder of North Shore Indices. Mr. Rotolo goes on to note that “the dual-class structure may reduce the pressure on company founders and management exerted by outside shareholders that may have short-term objectives, such as profits or share price maximization.”
The index, which underlies the Fund emphasizes younger companies where the potential benefits of the dual-class structure may be the greatest and reduces that emphasis as the company matures.
The domain expert developing the Index is Panos N. Patatoukas, Ph.D., a tenured Associate Professor and the L.H. Penney Chair in Accounting at U.C. Berkeley, Haas School of Business. Dr. Patatoukas notes that “the dual-class equity structure may allow companies to pursue strategies and goals that have a potential long-term payout with less outside pressure for short-term performance.” A vital feature of the Index is that it targets dual-class companies during the time in their corporate history when we believe that the net benefits of the dual-class equity structure are still positive.
“While dual-class companies may represent attractive investment opportunities, investors lack pure-play investment vehicles to gain exposure to these companies,” says Mr. Rotolo, who further notes that “an important part of our thesis is that major index providers have reduced the weighting of, or totally eliminated, dual-class companies from their indices.”
DUAL may provide an attractive investment vehicle for investors seeking alternatives to traditional US equity exposure as well as exposure to the potential growth of dual-class companies.
Learn more about the fund at http://dualetf.com/
For more market trends, visit ETF Trends.