Canada
Hamilton lists mean reversion banks ETF
Hamilton Capital, a Toronto-based ETF provider that specializes in banking and financial ETFs, is listing a new banking ETF that targets mean reversion. The Hamilton Capital Canadian Bank Dynamic-Weight ETF (HCB) will invest in Canada’s six largest banks. At each monthly rebalancing, the portfolio will overweight the three most oversold banks from the prior month and underweight the three most overbought. It will use a proprietary and rules-based method to determine which are overbought and oversold.
HCB will charge 0.55%.
Analysis – Canadian banks
The Canadian banks are the golden goose of the TSX. They make insane amounts of money and thanks to their steady growth and reliable dividend cheques they’re a favourite with Canadian retail investors. Having a specialist ETF issuer that provides only banking and financial ETFs – like Hamilton – would make little sense anywhere else.
Investors considering HCB should be aware that the product is only, really, for Canadians. Canadian banks make great investments, but if you live overseas you’ll lose 30 – 15% of the dividend cheque in withholding tax. And, as is often the case with financials, much of the total return they provide comes from the dividend cheque.
USA
Goldman lists plain vanilla TIPS fund
Goldman Sachs is widening outs its fixed income ETF offering, listing an inflation-protected ETF right in time for rising rates. The Goldman Sachs Access Inflation Protected USD Bond ETF (GTIP) will track the FTSE Goldman Sachs Treasury Inflation Protected USD Bond Index. The Index is designed to track the performance of inflation-protected, fixed rate Treasuries that meet certain screening criteria.
As of 30 June 2018, there were 36 issues in the index and the Index had a weighted average maturity of 8.3 years and a weighted average duration of 7.8 years, the prospectus says.
Analysis – will gather assets and be profitable
TIPS ETFs are like the opposite of ESG ETFs. They get absolutely no press, whereas ESG get lots. No-one under the age of 40 is interested in TIPS – whereas under-40s are the target market for ESG. TIPS ETFs are very cheap with an average TER of 0.14% -- whereas the average ESG ETF cost on average 0.50%. What is more, TIPS ETFs are highly profitable, with only one out of the twelve US-listed TIPS ETFs running at a loss. Almost all ESG ETFs, by contrast, are money losers.
We expect today’s listing will gather assets and make money, as almost all US-listed TIPS ETFs have.
Corporate action
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