(An earlier version of this story said the funds were
launched as scheduled today. IndexUniverse was informed after
publication of the story that the rollouts were delayed until
June 20. We regret the inaccuracy.)
Zacks Funds, a Chicago-based financial research firm and mutual
fund manager, on June 20 plans to roll out through Exchange Traded
Concepts' ETF platform a pair of ETFs-one focused on
dividend-paying stocks and the other serving up exposure to master
At heart, both the Zacks Sustainable Dividend ETF
(NasdaqGM:ZDIV) and the Zacks MLP ETF (NasdaqGM:ZMLP) are designed
to serve up yield potential. ZDIV, costing 0.70 percent a year,
invests in 100 U.S. dividend-paying stocks selected from a universe
of 1,500 large-cap securities. ZMLP invests in 25 to 50 U.S.-listed
MLPs and costs 0.75 percent.
Zacks is the latest to join the hunt-for-yield juggernaut, going
head-to-head with some well-established competition from fund
providers such as iShares, ALPS, Invesco PowerShares and Global X
Funds, to name a few.
The company is hoping to tap into investor appetite for
strategies that promise income at a time when navigating highly
volatile global equities markets has provided anything but safety,
and when interest rates remain near all-time lows.
Both funds track proprietary benchmarks that apply a
quantitative rules-based multifactor methodology to pick and weight
only the securities that show the highest yield potential from
their respective market segments.
The two funds will be listed on Nasdaq, the No. 2 U.S. stock
exchange that has a growing presence in the world of ETF primary
Going The Dividend Route
In the dividend-ETF space, a pair of iShares funds currently
holds the bulk of investor dollars.
The iShares Dow Jones Select Dividend ETF (NYSEArca:DVY) is the
largest, with more than $8.52 billion in assets, while the iShares
High Dividend Equity ETF (NYSEArca:HDV) boasts of $1.5 billion in
DVY is also among the funds that has served up some of the
highest dividend yields in the space-currently in the neighborhood
of 3.5 percent-much like the $195 million PowerShares High Yield
Equity Dividend Achievers Portfolio (NYSEArca:PEY) and the $435
million WisdomTree Equity Income ETF (NYSEArca:DHS).
But it's been HDV that has delivered one of the highest 12-month
total returns, even if its dividend yield has been among the
lowest, putting into focus just how crucial a fund's methodology is
to its performance, as IndexUniverse analyst Carolyn Hill pointed
out in a recent blog.
ZDIV-and ZMLP, for that matter-takes into account several
factors to choose its securities and determine their weighting,
including liquidity, yields and relative value. Both funds strive
to invest in the highest-yielding names.
ZDIV's underlying index is split into two equal subindexes, each
comprising 50 stocks-the underlying securities are chosen and
weighted based on liquidity and yield. The rebalancing takes place
monthly, but in an alternating fashion:Each subindex is rebalanced
only every other month so that each group of securities is held for
61 days, according to information the company provided in the
The Hunt For Yield Through MLPs
MLPs are partnerships that generate most of their income from
the natural resources sector, but they make money from fees rather
than from the underlying commodities themselves, which protects
them from volatility spikes in commodities prices.
Their special tax treatment-MLPs are not taxed as
corporations-allows them to pay hefty dividends, an attractive
feature for an investor looking for income.
ZMLP will go head to head against funds like the $3.1 billion
ALPS Alerian MLP ETF (NYSEArca:AMLP), which until a few months ago
was the only MLP-focused strategy in an ETF wrapper, and the $3.4
billion JP Morgan Alerian MLP ETN (NYSEArca:AMJ).
Newcomer to the space Global X MLP ETF (NYSEArca:MLPA), launched
in April, will also give ZMLP a run for its money because MLPA is
by far the cheapest MLP-focused portfolio in the market today. The
$5.5 million fund costs 0.45 percent, while AMLP and AMJ each cost
ZMLP is the second MLP-focused ETF to be launched through
Exchange Traded Concepts' private label "ETF In A Box"
Before it, Yorkville partnered with ET Concepts to launch the
Yorkville High Income MLP ETF (NYSEArca:YMLP) in March. YMLP costs
0.82 percent and has gathered $30.7 million in assets since
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