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Spa ETF launches first US ETFs on Amex

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Spa ETFs Inc, the US-based affiliate of London-based exchange-traded fund provider Spa ETF, has listed an initial range of six US equities-focused funds on the American Stock Exchange, thr

Spa ETFs Inc, the US-based affiliate of London-based exchange-traded fund provider Spa ETF, has listed an initial range of six US equities-focused funds on the American Stock Exchange, three determined by the number of stocks in the index basket and three based on capitalisation size.

The funds reflect the performance of fundamentally-driven indices created by US research firm MarketGrader to provide private and institutional investors with access to an investment vehicle with equal weighting, rebalancing and based on 24 fundamental factors.

The MarketGrader 40, MarketGrader 100 and MarketGrader 200 ETFs, based on MarketGrader core indices and launched on the London Stock Exchange Earlier this month, are baskets of 40, 100 and 200 top-rated North American securities.

The MarketGrader Small Cap, MarketGrader Mid Cap and MarketGrader Large Cap are based on the top 100 North American stocks within each market capitalisation category and were listed in London on September 12.

‘This is a very exciting time for ETFs in the US Market, with more than 900 funds launched worldwide, and we are thrilled to launch Spa ETFs to investors that possess unique qualities in this crowded space,’ says Spa ETFs Inc director Daniel Freedman.

‘We have found in MarketGrader a fundamentally-based methodology system that has a solid performance history, and are confident this will provide investors with an investment tool that will stand out among this growing market.’

All the stocks in each basket have an equal weighting, of 2.5 per cent for the MarketGrader 40 ETF, 1 per cent for the MarketGrader 100 and the three funds based on capitalisation size, and 0.5 per cent for the MarketGrader 200.

Each index also undergoes a self-correcting rebalancing process to maintain equal weighting and ensure holdings are of optimal grade, replacing stocks that have become overvalued with more attractive, undervalued opportunities.

A major advantages of the MarketGrader system, Freedman says, is that it remains objective, removing emotion, over-reaction and bandwagon effects from the investment decision-making process. The MarketGrader 40 is rebalanced quarterly while all other indices are rebalanced semi-annually.

The MarketGrader system uses 24 quantitative filters within four areas (growth, value, profitability and cash flow) to carry out a thorough fundamental evaluation of more than 5,700 North American stocks. All MarketGrader indices have gone through at least five years of back-testing before their launch as ETFs.

Similarly, the alpha-generating capabilities of each index have been demonstrated before market launch. In the five years to September 7, the MarketGrader 40 index has achieved a cumulative return of 67.75 per cent, compared with 29.63 per cent for the S&P 500.

The listing of the funds is further evidence of Spa ETF’s growing US presence following its hiring of a team of professionals to staff its new headquarters in New York. The ETF provider is affiliated with London & Capital, an independent UK-based firm of investment advisors and fund managers with USD3.5bn in assets under management.

Marketgrader.com is a privately-owned financial research firm incorporated in the US in 1999, with which London & Capital signed an exclusive agreement in 2004 to incorporate its fundamental index research into a series of investible products.

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