May 2024 IssueLong scroll reading

Briefly Noted

By TheShadow

Fidelity Investments is planning to charge a $100 servicing fee when placing buy orders on exchange-traded funds issued by nine firms. The new servicing charge, which may be imposed on ETFs issued by Simplify Asset Management, AXS Investments, Day Hagan, Sterling Capital, Cambiar, Regents Park, Rayliant, Adaptive, and Running Oak, is set to take effect on June 3. The new fee will apply to ETFs that do not participate in a maintenance arrangement with Fidelity.  Fidelity may update its “Surcharge-Eligible ETF” list again.    

Poster Rforno noted that Calamos Investments LLC announced the launch of 12 structured protection exchange-traded funds which seek to provide 100% protection and equity upside to a predetermined cap over one-year outcome periods (before fees and expenses). The ETFs are designed to offer capital-protected exposures to the S&P 500, Nasdaq-100, and Russell 2000 benchmarks, making it the most comprehensive lineup of its kind. The first listing, Calamos S&P 500® Structured Alt Protection ETF – May (ticker: CPSM), is anticipated to launch May 1st with an upside cap range of 9.20% – 9.65%. The ETFs will be managed by Calamos’ Eli Pars, Co-CIO, Head of Alternative Strategies and Pars’ Alternatives team

All 12 Calamos Structured Protection ETFs will have an annual expense ratio of 0.69%. Potentially interested parties might want to read Devesh Shah’s series on options-based funds since those offer a serious caveat about what happens when you expect magic.

Victory Capital has agreed to acquire Amundi US with Victory Capital.  Victory Capital is a global asset manager headquartered in San Antonio. Much of their business model centers on acquiring other managers who then operate as semi-autonomous divisions. One recent acquisition was USAA Asset Management. Victory now has over $175 billion in assets under management (as of March 31, 2024). The firm offers access to its strategies through open-end funds, exchange-traded funds, separately managed accounts, collective investment trusts (CITs, a European analog of mutual funds), and 529 plans.

Amundi, meanwhile, is Europe’s largest asset management firm with €2.2 trillion in AUM, 100 million clients in 35 countries, and a strong ESG commitment. In short, this is no small deal.

Under the proposed transaction:

  • Amundi US would be combined into Victory Capital in exchange for a 26.1% economic stake for Amundi in Victory Capital, with no cash payment involved. Amundi would become a strategic shareholder of Victory Capital with two of its representatives joining the Victory Capital Board of Directors when the transaction closes.
  • Both parties would simultaneously enter into 15-year reciprocal distribution agreements.

Under these proposed distribution agreements:

  • Amundi would be the distributor of Victory Capital’s investment offering outside of the US. This would allow Victory Capital to further expand its reach beyond the US through Amundi’s global client base, which would benefit from Victory Capital’s deep investment expertise and strong investment performance track record across a wider range of US-manufactured solutions.
  • Victory Capital would become the distributor of Amundi’s non-US manufactured products in the US. As a result, Amundi would gain access to an expanded distribution platform in the US, while providing Victory Capital’s clients with its wide range of high-performing non-US investment capabilities.

Small Wins for Investors

The TCW Group has filed initial registration filings for the two new active fixed-income exchange-traded funds (ETFs):

TCW Multisector Credit Income ETF, which may invest in fixed-income securities of any type, credit quality, currency, domicile, or maturity. “Credit” in a name is usually a signal for a substantial exposure to non-investment-grade securities, for whom creditworthiness rather than interest rates are the primary risk. The fund will be managed by  Jerry Cudzil, Brian Gelfand, Christopher Hays, Steven Purdy, and David  Robbins. The guys represent a variety of fixed-income specialties at the firm.

TCW AAA CLO Bond ETF, which will invest in a portfolio composed of U.S. dollar-denominated AAA-rated collateralized loan obligations. The fund will be managed by Bryan Whalen, Elizabeth Crawford, Peter Van Gelderen, and Palak Pathak. Mr. Whalen is their fixed-income CIO. Mr. Van Gelderen joined the group in 2023 from American Century Investments. He and Ms Crawford co-lead the securitized products group. Expenses have not yet been disclosed.

Old Wine, New Bottles

“Effective on the Effective Date” (thanks, guys!), the name of the AAM/Bahl & Gaynor Income Growth Fund will change to Bahl & Gaynor Income Growth Fund. The management fee

Fort Pitt Capital Total Return Fund is migrating to the North Square Investments Trust. Same investment objective and strategies, adviser, and management team.

On around June 3, 2024, iShares Factor US Growth Style ETF becomes iShares MSCI USA Quality GARP ETF. A substantial portfolio evolution will follow, shifting from mid- to large-cap growth stocks to mid- to large-cap growth stocks “exhibiting favorable value and quality characteristics.” As currently constituted, the ETF has a great record (five stars at Morningstar, top 2% returns over the past three years, Great Owl at MFO with returns exceeding its peers by nearly 800 bps annually), and no assets ($48 million). As reconstituted, the fund will have dramatically lower expenses (15 bps) and a nice niche.

On June 18, 2024, Neuberger Berman Short Duration Bond Fund becomes Neuberger Berman Short Duration Income ETF. The ETF will operate with the expense ratio of the current fund’s Institutional share class.

The TCW Group has filed filings for the conversion of four active income funds into ETFs. Shareholders will prospectus/related information concerning the conversions; the conversions do not require shareholder approval.

  • MetWest Flexible Income Fund, converting to TCW Flexible Income ETF
  • MetWest Floating Rate Income Fund, converting to TCW Senior Loan ETF
  • MetWest Investment Grade Credit Fund, converting to TCW Investment Grade ETF
  • TCW High Yield Bond Fund, converting to TCW High Yield Bond ETF

Off to the Dustbin of History

abrdn Emerging Markets Sustainable Leaders Fund will merge into the abrdn Emerging Markets ex-China Fund on or about June 21, 2024.

Angel Oak Financials Income Impact Fund will be liquidated on or about May 24.

Brookfield Real Assets Securities Fund was liquidated on April 30, 2024.

The DCM/INNOVA High Equity Income Innovation Fund (TILDX) has terminated the public offering of its shares and will discontinue its operations effective May 24, 2024. It’s poignant just because it’s the shell of a once-great fund. Tilson Dividend begat Centaur Total Return, the two prior owners of the TILDX ticker, with Centaur being a purely splendid tiny fund that investors seemed not to embrace because its strategy wasn’t narrow enough for them and its advisor wasn’t grand enough in scale or ambition.

Defiance Israel Fixed Income ETF will be liquidated on or about May 24.

FlexShares ESG & Climate Emerging Markets Core Index Fund was liquidated on April 23, 2024.

Liquidation of Global X MSCI Next Emerging & Frontier ETF has been rescheduled “in order to facilitate the orderly unwinding of the Fund’s underlying assets and their conversion into U.S. dollars.” Said orderliness will now transpire on May 17, 2024.

IQ U.S. Small Cap ETF underwent liquidation and dissolution on April 29, 2024.

Navigator Equity Hedged Fund will close and liquidate on May 24, 2024.

Opportunistic Trader ETF (WZRD) will cast a disappearing spell on or about May 9.

PMC Core Fixed Income and Diversified Equity Funds, institutional and advisor share classes, will liquidate on or about May 31.

Polen Emerging Markets ex China Growth ceased its business, liquidated its assets, and generally passed away on April 23, 2024.

Polen Global Smid Company Growth Fund will be liquidated on or about May 23.

ProShares S&P 500 Bond ETF was liquidated on April 22, 2024.

Redwood Managed Volatility Portfolio will be liquidated and dissolved on or about June 21, 2024.

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About TheShadow

The Shadow here! Like Mark, I’m a long-time member of the MFO community. I’ve started over 2300 discussion threads, most focusing on developments in the fund industry. I am a personal investor that was introduced to mutual funds when I was young to fund my college education. As I have grown older, I have expanded my mutual funds holdings to a point where I probably have too many; however, this year they all did extremely well due to the overall performance of the market. I work in the financial industry regulating the consumer finance industry in my state. My hope for the months ahead is that I might share word of developments in the finance industry – the comings and goings, launches and liquidations, the fun and the follies – with you.