Waddell & Reed Financial’s affiliate Ivy Investment Management has filed a registration statement with the Securities and Exchange Commission (SEC) to register five new index funds, the first passively managed funds offered by the firm.
The funds, to be managed by IICO and sub-advised by ProShare Advisors, the advisor to the ProShares ETF line-up, are expected to become effective in April.
They will be offered by Ivy Distributors, through the Waddell & Reed broker-dealer, as well as through unaffiliated distribution.
The Ivy ProShares S&P 500 Dividend Aristocrats Index Fund will invest in S&P 500 companies with at least 25 years of consecutive dividend growth and will be based on the S&P 500 Dividend Aristocrats Index.
The Ivy ProShares Russell 2000 Dividend Growers Index Fund will invest in small cap companies that have grown dividends for at least 10 consecutive years and will be based on the Russell 2000 Dividend Growth Index.
The Ivy ProShares MSCI ACWI Index Fund will seek to track MSCI ACWI performance and will be based on the MSCI All Country World Index.
The Ivy ProShares S&P 500 Bond Index Fund is designed to track index of corporate bonds issued by S&P 500 companies and will be based on the S&P 500/MarketAxess Investment Grade Corporate Bond Index.
The Ivy ProShares Interest Rate Hedged High Yield Index Fund will invest in a diversified portfolio of high yield bonds and in an effort to hedge against rising interest rates and will be based on the Citi High Yield (Treasury Rate-Hedged) Index.
“Financial advisers increasingly are combining both active and passive investment management styles when building client portfolios. These new products allow us to pair a highly experienced index fund manager with our skilled in-house Ivy investment management team, whose focus of course is on active management,” says Thomas W Butch, executive vice president of Waddell & Reed Financial and CEO of Ivy Distributors.
“We chose these five categories precisely because they complement our active product line-up, and they are differentiated styles, outside of what we believe are more commoditised passive asset classes commonly available elsewhere,” he adds. “For example, the S&P 500 Bond Index Fund, tracking bonds of the index’s companies, will be the first index mutual fund with this strategy to this point.”
Index funds typically are a cost-effective way for investors to track a benchmark index, meaning returns to index funds, over time, generally should mirror returns of their tracking index, minus any fund expenses. The divergence between the net returns of an index fund and its tracking index is referred to as tracking error. IICO and ProShares intend to monitor continually the performance and tracking error of the proposed Ivy ProShares Index Funds to seek to ensure investors' expectations are properly addressed, according to Ivy executives.