New York based Global X is best known for its wide range of commodity and country ETFs and it has been quite active this year launching or filing a slew of new products.
After launching two products, GURU International Index ETF (GURI) and GURU Small Cap Index ETF (GURX), in March and filing for an Emerging Market Bond and Commodities ETF in June, the issuer is back in the market with two new filings (read: Global X Plans Emerging Market Bond, Commodity ETFs).
The first product – Global X FTSE Luxury Consumer ETF – looks to target the luxury segment of the consumer sector, while the second – Global X | JPMorgan US Sector Rotator Index ETF – follows a sector rotation strategy.
Though some key information, including expense ratios and holdings, was not released, we have highlighted some of the major points for both the proposed funds below.
Global X FTSE Luxury Consumer ETF
As per the SEC filing, the proposed passively managed fund seeks to match the performance of the FTSE Luxury Consumer Index. The index tracks the performance of companies which are primarily involved in providing global luxury goods and services.
As such, the index includes manufacturers and retailers of luxury goods, travel and leisure firms, and investment and other professional services firms. However, investors should keep in mind that apart from other risks, the fund is also subject to non-diversification and foreign currency risk.
The ETF could be a good choice for investors who want to invest in companies involved in providing global luxury goods and services. The global consumer confidence index is gradually showing an upward trend.
However, the index still stands below 100. Just as an index above 100 indicates degrees of optimism, a below 100 reading suggests degrees of pessimism (read: 3 Consumer Discretionary ETFs Set to Surge).
This ETF, if approved, could be the first, after the closure of Claymore/Robb Report Global Luxury Index ETF (ROB) in 2010, to focus exclusively on the luxury good and services segment of the consumer market.
The proposed fund is quite similar in style and objective to the erstwhile ROB, which tracked the Robb Report Global Luxury Index. The index also tracked companies whose primary business was the provision of global luxury goods and service. However, the fund didn’t turn out to be successful as it failed to gather significant assets.
Global X | JPMorgan U.S. Sector Rotator Index ETF
The proposed fund will be a fund of funds seeking to track the JPMorgan U.S. Sector Rotator TR Series X Index, comprising equity and fixed income ETFs.
The index rebalances monthly and selects its holdings from the 10 Select Sector SPDR ETFs and the iShares 1-3 Year Treasury Bond ETF ((SHY - Free Report) ). The 10 U.S. sectors represented by the sector ETFs include consumer discretionary, consumer staples, energy, financials, healthcare, industrial, utilities, materials, technology and real estate (see Total Market (U.S.) ETFs here).
The index selects five sector ETFs with the highest positive performance during the previous month and equal-risk weights them based on their realized volatility in the past month.
However, the index includes the Treasury bond ETF in case there are less than five U.S. sector ETFs clocking a positive performance during the prior month or if the overall volatility of the portfolio of the five sector funds exceeds a designated level in the previous month (read: 3 Ultra Safe Bond ETFs to Dodge Market Turmoil).
The fund might be a good option for investors willing to play the best performing sectors of the U.S. economy. Moreover, the fund does a good job by opting to invest in the U.S. Treasury bond ETF in case there are less than five sectors delivering a positive performance during the prior month.
However, not unlike luxury consumer funds, the U.S. sector rotation funds also did not have a successful run in the past. Among others, Sector Rotation ETF (XRO) is one of the funds that failed to gather significant assets and had to be shut down.
U.S. Equity Rotation Strategy ETF ((HUSE - Free Report) ) is, however, an ongoing fund launched in 2012. The actively managed fund doesn’t track any particular index and seeks to invest in the 10 U.S. sectors included in the S&P Composite 1500.
Presently, the fund holds 381 stocks with health care, technology and industrials being the top three sectors. As far as individual holdings are concerned, Apple takes the top position, followed by Biogen and Exxon Mobil. HUSE charges 95 basis points as expenses.
Thus the success of the newly filed products is a huge factor of its ability to garner sizeable assets. If the funds do succeed in doing so they might have great times ahead or else they are destined for closures like others in their space.
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