Each month brings new ETFs to the ever-expanding ETF ecosystem. And October had its fair share of intriguing launches. According to ETF Database data, a total of 134 ETFs launched last month. Overall ETF launches are on track for another record-breaking year. Three newcomers from that crop help capture some of the key trends in October ETF launches for investors, including an equity income ETF and a “meme stock” fund.
ETF product proliferation has offered investors more tools than ever to craft bespoke portfolios. With their tax efficiency, transparency, and flexibility, the ETF wrapper has helped package hundreds of strategies to help investors meet their goals. October’s group includes all kinds, from buffer ETFs to funds like the Roundhill Meme Stock ETF (MEME).
October ETF Launches Revisited
MEME launched on October 8. Roundhill has had success with thematic funds in the past, with its largest ETF, the Roundhill Magnificent Seven ETF (MAGS), with $3.6 billion in AUM. MEME joins the firm’s now-43-fund-strong roster as its latest addition, per ETF Database data.
MEME charges a 69 basis point (bps) fee for its services. The fund actively invests in equities its managers identify as “meme stocks.” Those include stocks experiencing an often-sudden spike in trading activity. That can stem from increased engagement across online platforms and forums.
Its managers rank its universe of 200 highly traded U.S.-listed stocks by implied volatility, with the top 30 then identified as “meme stocks.” It calculates implied volatility based on options market prices, looking to capture market expectation of price swings. Interestingly, MEME is the second ETF with that ticker, as the firm previously operated a passive version of the same ETF that has since closed.
Reshoring ETF DRES
Founded in 1977, Grantham, Mayo, and Van Otterloo (GMO) has nine total ETFs. Its largest, the GMO U.S. Quality ETF (QLTY), launched in fall 2023. It has $2.7 billion in AUM. Its ninth, the GMO Domestic Resilience ETF (DRES), joins the large group of active October ETF launches. DRES charges 50 bps for an active approach that emphasizes the so-called reindustrialization trend in the United States.
Specifically, DRES actively invests across market capitalizations, looking for total return from U.S. equities. DRES’ managers target companies poised to benefit from the onshoring of production and supply chains back to the U.S. Its targeted sectors include defense, energy, transportation, automation, and more. Its managers do so by leaning on fundamental research, assessing metrics like profitability, earnings stability, and more.
Equity Income ETF OEI
One would be remiss not to note the continued popularity of flexible, income, or downside protection ETFs that joined the October ETF launches. One such fund, the Optimized Equity Income ETF (OEI), merits a closer look. From Core Alternative Capital, the strategy arrives as just the second ETF from the shop, per ETF Database data.
OEI charges a 75 bps fee for its active approach. The fund aims to provide active, monthly income via U.S. equity investments, combined with an options overlay. Its managers combine top-down market analysis with bottom-up research to construct its portfolio. The ETF writes OTM call options on equity securities as needed, written on 25%-75% of the fund’s total holdings. Its managers also apply puts where needed to add in some downside protection.
As just the firm’s second ETF, that the managers chose an equity income ETF speaks to the category’s growing status among ETFs. Overall, the October ETF launches added a slew of new exchange traded funds for investors to consider. With the wrapper’s flexibility and growing ETF adoption, investors and advisors should expect even more big launch months ahead.
Originally published on Advisor Perspectives
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