An exchange traded fund created to track a basket of initial public offerings --Renaissance IPO ETF (IPO) -- had its own IPO on the New York Stock Exchange Wednesday, aptly trading under the ticker IPO.
The ETF created by Renaissance Capital of Greenwich, Conn. -- the 800-pound gorilla in IPO research and investment management -- started trading at $20 a share.
IPO will snatch up the largest and most liquid newly listed U.S. companies on their fifth day of trading or will add them quarterly. It will hold the stocks for two years only. The ETF currently has 49 holdings and charges 0.60% of assets a year as a management fee.
Its largest positions are in social-media giantFacebook ( FB ), drugmakerZoetis ( ZTS ), car parts makerDelphi Automotive ( DLPH ), and high-end fashion designer and retailerMichael Kors ( KORS ). Each of these is weighted 10%-11% of assets.
IPO will compete with First Trust U.S.IPO Index Fund ( FPX ), with $185 million in assets, and Renaissance's mutual fund Global IPO Plus Aftermarket , with $56 million in assets. FPX, which also carries a 0.60% expense ratio, holds 100 stocks that have been trading for less than 1,000 days. Holdings are weighted quarterly by market capitalization.
FPX's largest holdings now areFacebook , weighted at 11% of assets,Abbott Laboratories (ABT) spin-offAbbVie (ABBV) 9%, automakerGeneral Motors (GM) 7%, oil refinerPhillips 66 (PSX) 4% and natgas transporterKinder Morgan (KMI).
FPX has climbed 34% year to date vs. 21% for SPDR S&P 500ETF (SPY). As the top-performing ETF in its Morningstar large-cap growth category in the past one, three and five years, FPX returned 45% and an average annual 25% and 24% in those periods.
Tesla (TSLA), the biggest winner in the FPX portfolio, has zoomed an eye-popping 441% year to date. The No. 2 leaderGroupon 's (GRPN) 135% spike pales in comparison.
Global IPO Plus Aftermarket has rallied a handsome 42% year to date. But it lags the benchmark longer term. The mutual fund returned an average annual 9%, 9% and 4% in the past three, five and 10 years while SPY gained 15%, 16% and 7% over the same periods. IPOSX carries a steep expense ratio of 2.5%.
U.S. IPO Market
Renaissance counts 167 companies that went public in the stock market this year, nearly 50% more than the year-ago period. The vast majority is in health care, financial services and technology.
But the amount of money IPOs raised from investors this year dipped nearly 6% to $37.1 billion. On average, IPOs gained 34% from their offer price. According to Renaissance, 212 companies have filed for an IPO for this year.
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