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A Flurry Of IPOs Might Lift IPO ETFs

The U.S. IPO space, which was subdued at the start of 2015, looks to be on fire this week. As per Renaissance Capital , as many as 14 companies are slated to go public this week. This makes the week starting from May 4 the ‘busiest week’ of 2015 so far, per 247wallst.com . Investors should note that after a massive run last year, the IPO market cooled down considerably in the first quarter of 2015. Per Renaissance , 34 IPOs raised $5.4 billion in capital, making Q1 of 2015 the most inactive per IPO tally since 1Q of 2013. Also, the proceeds from IPO were the least since 3Q of 2011. Only, the health care sector managed to tread water in the gloomy U.S. IPO market. Rising rate worries, a strong greenback and later a moderation in U.S. growth have probably raised concerns over the space. However, with the Fed repeatedly hinting at a delayed rate hike, the space has now bucked up. Renaissance Capital’s IPO schedule indicated that the following companies are making a public market debut this week. These are Tallgrass Energy GP LP, Adaptimmune Therapeutics, International Market Centers, Commercial Credit, Bojangles, Collegium Pharmaceutical, aTyr Pharma, CoLucid Pharmaceuticals, Klox Technologies, MultiVir, Gelesis, Anterios, HTG Molecular Diagnostics and OpGen. The deal size ranges from $15 million to $900 million with OpGen having the lowest and Tallgrass Energy leading. Like Q1, the offerings are ruled by the health care and biotech space, with 10 out of 14 companies being bio-pharmaceuticals. Looking at the trend, one can assume that the sagging scenario of Q1 in the U.S. may turn around in Q2. Things are looking better at the international arena as ample cheap money will shore up corporate activities at foreign shores. Still, investors having faith in the revival of domestic operations might take a look at two IPO ETFs that are presently on offer. This is especially true given that the U.S. markets are now in the most active IPO week ‘ since the week of July 28, 2014 ‘, per Renaissance Capital. Renaissance IPO ETF (NYSEARCA: IPO ) Holding 56 stocks in the basket, the fund follows the Renaissance IPO Index, which holds the largest and most liquid newly listed U.S. initial public offerings. New companies seek inclusion on a ‘fast entry basis’ on the fifth day of trading. Currently, the product allocates more to Alibaba at 9.04%, closely followed by Twitter (7.46%) and Hilton (5.91%). Mid caps rule the portfolio with over half of the allocation. IPO ETF has attracted $28 million in its asset base. The ETF sees low volume of nearly 10,000 shares, suggesting additional cost beyond the expense ratio of 0.60%. From a sector look, technology stocks make up for over one-third share followed by consumer discretionary (20%), financials (17%) and health care (10%). The fund has added 6% year to date (as of May 4, 2015). First Trust US IPO Index Fund (NYSEARCA: FPX ) This ETF targets the U.S. IPO market and follows the IPOX-100 U.S. Index. It has accumulated $673.3 million in AUM and charges 60 bps in fees a year. Volume is decent as it exchanges around 75,000 shares in hand on average. In total, the fund holds 100 securities. The product has a nice mix of sectors, with the top two being consumer discretionary (23.87%) and information technology (22.01%). The red hot IPO sector health care takes about 18.55% of the basket. Since the ETF focuses on the 100 largest and most liquid U.S. IPOs, new companies can find entry into the fund’s holding after trading for a minimum of 100 days. FPX is up 7.5% so far this year (as of May 4, 2015). Original Post

Gundlach’s DoubleLine Launches First ETF

By Alan Gula Pacific Investment Management Co. (PIMCO) is facing an investor confidence crisis. The storied bond firm experienced over $150 billion of mutual fund outflows in 2014. And PIMCO’s flagship Total Return Fund is now 54% smaller than it was at its peak in April 2013, when assets under management (AUM) reached $293 billion. The exodus intensified after the abrupt and unceremonious departure of Co-Founder Bill Gross in September 2014. But one firm has benefited greatly from the turmoil at PIMCO : DoubleLine Capital. Headed by Jeff Gundlach, DoubleLine saw its 13th consecutive month of net inflows in February, following a record monthly net inflow in January. With good reason, Gundlach is being hailed by many as the new “bond king.” And just last week, Gundlach’s DoubleLine launched its first exchange-traded fund (ETF), which will surely intrigue fee-conscious fixed-income investors. DoubleLine has partnered with ETF pioneer, State Street Global Advisors, to offer the SPDR DoubleLine Total Return Tactical ETF (NYSEARCA: TOTL ). DoubleLine’s lineup includes successful open-end mutual funds and closed-end funds, but this is its first ETF. The firm will actively manage TOTL, allocating capital among different fixed-income sectors using a top-down macroeconomic approach and selecting securities via bottom-up analysis. With 114 funds, the ranks of actively-managed ETFs are growing. However, with under $20 billion in aggregate AUM, it’s still a nascent area. PIMCO’s Total Return ETF (NYSEARCA: BOND ) is perhaps the most popular actively-managed bond ETF and has $2.5 billion in AUM. Although bond fund investors are typically long-term oriented and don’t necessarily need intra-day trading liquidity, ETFs often carry lower fees than their mutual fund counterparts. This is the case with TOTL, which has a net annual operating expense of 0.55%. This compares favorably to the investor share class of the DoubleLine Total Return Bond Fund N (MUTF: DLTNX ), which carries a fee of 0.73%. The institutional shares levy a 0.48% expense ratio, but you’ll have to pony up $100,000 to meet the minimum investment requirement. DoubleLine’s Total Return Bond Fund outperformed 91% of its peers in 2014, according to Bloomberg data. Like DoubleLine’s flagship fund, TOTL is an intermediate-term bond fund… but its mandate is a bit broader. Investments can include Treasuries, mortgage-backed securities (MBS), domestic and foreign investment-grade corporate bonds, foreign government bonds, including emerging markets, floating rate securities, etc. The fund will maintain at least 20% of its assets in MBS or securities with government guarantees, whereas DLTNX aims to maintain MBS exposure of 50% or greater. DoubleLine’s tactical ETF may invest up to 25% of its net assets in high-yield bonds. The fund will target a lower duration (interest rate risk) than that of the benchmark Barclays U.S. Aggregate Bond Index. Therefore, a rising interest rate environment (which is not my forecast, but is possible) should have a muted impact. DoubleLine’s first ETF, and its latest in an array of quality offerings, is an exciting development for both the firm itself and fixed-income investors looking for additional fund choices and lower fees. At its peak, PIMCO managed over $2 trillion. At the end of 2014, DoubleLine managed a much smaller, but quickly growing, $64 billion. Of course, performance, not size, should be used as a yardstick for greatness. And there’s no doubt in my mind that DoubleLine is already a giant in the industry. Original Post