Two BlackRock ETFs are facing the prospect of selling as much stock of two energy companies as traded in 40-50 days to comply with dramatic index rebalancing. Also, the ETFs might need to sell over 10% of the free-float market cap of some other entities if the shake-up goes on as proposed.
Stocks to be rebought going ups ahead of rebalancing
Peter Sleep, 7 Investment Management senior portfolio managers said that every hedge fund is looking at the list to ascertain where they can purchase the stocks to offer the short. Morningstar passive strategies senior fund analyst Kenneth Lamont said that this offers a front-running opportunity. Lamont said that the stocks that will be bought are possibly going up in anticipation of the rebalancing.
Since the start of last year, combines assets of European Ucits equivalent and US-based iShares Global Clean Energy ETF (ICLN) have surged to around $10.8 billion from 760 million after sharp inflows rise after President Biden’s election and a 140% rally in the underlying index.
This has resulted in concentration problems considering the two BlackRock ETFs, and 45% of the money invested in non-fossil fuel ETFs track the S&P Global Clean Energy Index, comprising just 30 stocks. The problem comes from a combination of massive money flows in the ETFs, which replicate an index that launched 14 years back, whose rules don’t appear to be suitable for large assets collected by the ETFs. According to the SocGen report, the index rules result in a considerably high concentration, smaller caps overweight at the expense of large caps, and selection of poorly liquid stocks.
Two Guinness Atkinson Asset Management mutual funds start trading as ETFs
Guinness Atkinson Asset Management has announced that two of its mutual funds have commenced trading as Exchange Traded Funds under the company’s SmartETFs brand. The converted mutual funds are Guinness Atkinson Asia Pacific Dividend Builder Fund (NASDAQ:GAADX) and Guinness Atkinson Dividend Builder Fund (NASDAQ:GAINX). In a non-taxable event for the mutual funds’ stockholders, the two mutual funds’ share will now trade as SmartETFs Asia Pacific Dividend Builder (NYSEAMERICAN:ADIV) and SmartETFS Dividend Builder (NYSEAMERICAN:DIVS) respectively.
Jim Atkinson, Guinness Atkinson Asset Management’s CEO said that he delighted with the Guinness Atkinson team, partner advisors, and shareholders who will be better served by the company’s current strategies through an ETF. He said that seeing the strategies trade as ETFs offers confidence that the company will continue offering innovative and ground-breaking solutions to SmartETFS and Guinness Atkinson Asset Management shareholders.
SmartETFs focus on dividend-paying stocks
The SmartETFs Dividend Builder ETF is an active dividend growth strategy seeking dividend-paying companies providing an inflation-adjusted cash flow ROI of at least 10% in each of the past ten years. The ETF invests in around 35 dividend-paying firms globally, with Mathew page and Ian Mortimer continuing to manage the strategy. Similarly, SmartETFs Asia Pacific Dividend Builder ETF is an actively run dividend strategy focusing on investing in dividend-paying stocks in the Asia Pacific region.