LocalShares, a Nashville, Tenn.-based money management firm that said last October it planned to sponsor an equities ETF focused solely on companies based in or around Nashville, appears to be on the verge of actually launching that product.
We wrote about the company's plans when they first surfaced last May, expressing doubts that the fund would ever see the light of day, and arguing that the strategy risked being too specific in the context of a maturing ETF industry that has begun to evolve past the marketing of highly specific strategies that were almost trendy before the crash of 2008.
That said, the company did file updated regulatory paperwork this week saying that what it's now calling the Nashville Area ETF will have a primary listing on Arca, the New York Stock Exchange's electronic trading platform with the ticker "NASH" and it will have an annual expense ratio of 0.49 percent, or $49 for every $10,000 invested.
Inclusion of tickers and prices in a prospectus is frequently an indication that a given fund is on the verge of launching. Also of crucial importance, last month the firm did obtain "exemptive relief" from the Securities and Exchange Commission, which gives it actual legal permission to begin offering ETFs .
State-geography-based strategies aren't new in the ETF market, though it is definitely rare. In the fall of 2009, Geary Advisors launched the 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 to target individual states, 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 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.
While LocalShares 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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