Renaissance Plans For An IPO ETF Now In Motion

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Renaissance Capital, the research and investment management firm known for its IPO Plus Aftermarket Fund ( IPOSX ), this week put into motion its previously announced plan to market an ETF that will target new initial public offerings of U.S. companies.

The new Renaissance IPO ETF, which will be based on the firm's own Renaissance IPO Index, will have an annual expense ratio of 0.60 percent, or $60 for each $10,000 invested. That price matches that of the only other ETF canvassing the IPO universe, the seven-year-old $81 million First Trust US IPO Fund (NYSEArca:FPX).

The new ETF will also undercut by more than 75 percent the cost of Renaissance's own competing mutual fund, IPOSX, which has an expense ratio of 2.50 percent and has accumulated about $10 million in assets.

The ETF market provides a more efficient way for investors to gain exposure to initial public offerings than, say, seeking to get a piece of an individual IPO through a broker. Still, IPOs are generally considered risky, as many companies at the IPO phase of their development are relatively small and are more volatile than larger established companies that have longer histories as public corporations.

The Renaissance IPO Index on which the new ETF is based comprises common stocks, depositary receipts and operating units of newly public U.S. exchange-listed companies. These companies may include foreign companies that are listed on a U.S. exchange. Companies are considered to be newly public if they have completed an IPO in the last 500 trading days, the prospectus said.

Renaissance filed for regulatory permission to offer ETFs nearly a year ago, making clear at the time that it planned to use its own indexes on its funds.

Renaissance's "exemptive relief" petition requested permission to offer a broad swath of ETFs targeting U.S. and non-U.S. stocks and bonds, and it said at the time that the Renaissance IPO ETF would be its first fund and that it would be organized around the Renaissance IPO Index.

Exemptive relief grants ETF firms exception to sections of the Investment Act of 1940 and is just the first step in the path to launching ETFs. It often takes at least six to 12 months from the date of the initial filing for a company's first ETF to hit the market, meaning the IPO fund will come to market roughly on time.

Renaissance didn't say in the regulatory paperwork what the fund's ticker would be or on what exchange the new ETF would have its primary listing.

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This article appears in: Investing , ETFs

Referenced Stocks: FPX , IPOSX , PEK

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