LocalShares, a Nashville, Tenn.-based money management firm
looking to enter the ETF market for the first time, filed paperwork
with U.S. regulators to market an ETF that would invest solely on
companies headquartered in Nashville.
The LocalShares Nashville ETF would replicate a proprietary
index that tracks the performance of Nashville companies that have
a minimum of $100 million in market capitalization and that have
seen at least 50,000 shares in average daily trading volume during
the prior three months.
The index is weighted "on several publicly available factors,
including data related to earnings, sales, profitability, price and
yield of the components," the company said in the filing. The ETF
is expected to have annual fees totaling 0.49 percent.
This type of state-geography-based strategy isn't new in the ETF
market, though it is definitely rare. Back in the fall of 2009,
Geary Advisors launched the market's first state-based ETF, the
Oklahoma ETF (NYSEArca:OOK), and quickly followed it with a second
fund:the Texas Large Companies ETF (NYSEArca:TXF).
Geary's ETFs were the first ETFs to target the individual state
economies, but both funds were shuttered less than a year later
after failing to attract enough assets.
Interestingly, LocalShares tops its list of risk warnings to
investor by pointing out that this nondiversified strategy is a
"new fund," and as such it might not attract enough assets to keep
tracking error to a minimum or to even reach an "economically
viable size." The firm, it seems, has listed the possibility of
liquidation as the biggest risk associated with the fund.
What's more, LocalShares goes on to say in the filing that the
fund's distributor doesn't keep a secondary market in the shares,
and the fund's advisor "has never operated an investment company
such as the fund."
LocalShares is an investment trust headquartered in Nashville,
Tenn.
While the firm will serve as investment advisor to the ETF,
Decker Wealth Management is listed in the prospectus as subadvisor
to the fund.
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