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Fund Watch: BMO, JPMorgan, Active Alts, Deer Park And Hanlon

By DailyAlts Staff In this edition of Fund Watch, new filings from: BMO (NYSE: BMO ) Global Long/Short Equity Fund Active Alts Long/Short U.S. Equity Fund JPMorgan (NYSE: JPM ) Diversified Return Hedged International Equity ETF Deer Park Total Return Credit Fund Hanlon Tactical Dividend Momentum Fund Hanlon Managed Income Fund BMO Global Long/Short Equity Fund On June 12, BMO Funds, Inc. filed paperwork with the Securities and Exchange Commission (SEC) announcing its plan to launch the BMO Global Long/Short Equity Fund . The fund, which will be available in investor- and institutional-class shares, as well as a pair of R classes intended for eligible retirement plans, will pursue an investment objective of capital appreciation through taking long and short positions in equity securities based in the U.S. and abroad, with at least 40% of its assets invested in non-U.S. companies. The fund’s investments will be selected using a combination of bottom-up and top-down analysis, with long investments in fundamentally strong firms with good balance sheets; and short positions in fundamentally weak firms. Jay Kaufman, Ernesto Ramos and David Rosenblatt will be the fund’s portfolio managers. Active Alts Long/Short U.S. Equity Fund For investors more interested in domestic long/short exposure, ETF Issuer Solutions (ETFis) plans to launch the Active Alts Long/Short Equity Fund (Pending: LGSH ) (an exchange traded fund, or ETF), according to a June 8 filing with the SEC. The fund’s objective will be long-term capital appreciation with an emphasis on income, and it will pursue these ends by means of a bottom-up security-selection approach. Sub-advisor Active Alts will attempt to identify large- and mid-cap companies with good management and improving fundamentals for the fund’s long positions, and the opposite for its short positions. The fund’s investment strategy involves keeping both gross and net exposure below 100% under normal circumstances. A few fund details are as follows: Management fee of 1.55% Expense ratio of 1.85% Exchange listing: NASDAQ The fund will be managed by Brad Lamensdorf, founder of Active Alts. The firm has also filed, via ETFis, for the the Short Squeeze Fund . JPMorgan Diversified Return Hedged International Equity ETF On May 29, JP Morgan filed a Form N-1A with the SEC announcing its plan to launch the JPMorgan Diversified Return Hedged International Equity ETF later this year. The ETF is designed to track the FTSE Developed ex-North America Diversified Factor 100% Hedged to USD Index, which was developed to represent international stock performance with foreign-currency risk hedged out. The ETF’s holdings will be selected using a rules-based, proprietary factor methodology, with an emphasis on relative valuation, price momentum, low volatility, and specific market capitalization. Holdings may include large- and mid-cap stocks from developed countries, and equity positions are rebalanced quarterly. Deer Park Total Return Credit Fund Northern Lights Trust Fund filed paperwork with the SEC on June 8, announcing the intended launch of the Deer Park Total Return Credit Fund, a nontraditional bond mutual fund. Sub-advisor Deer Park Road Management – led by portfolio managers CEO Michael Craig-Scheckman and CIO Scott Burg – will pursue capital appreciation and current income by investing primarily in asset-backed securities ( ABS ) backed by real estate. This includes mortgage-backed securities (MBS) of residential and commercial varieties, and may include subprime investments. Deer Park will attempt to derive portfolio returns through fundamental analysis and security selection, seeking to identify and capitalize on attractive investment opportunities in the MBS and ABS markets. Hanlon Tactical Dividend Momentum Fund Two Roads Shared Trust plans to launch the Hanlon Tactical Dividend Momentum Fund by August 12, according to paperwork filed with the SEC on May 29. The fund is expected to go live within 75 days of the filing date. The Hanlon Tactical Dividend Momentum Fund seeks capital appreciation and current income, and it will pursue these ends by following a rules-based strategy that includes sector tactical overlay and ranking selection elements. The fund will track a custom index composed of stocks from each of the nine economic sectors in the U.S. economy, and it will use tactical algorithms to determine what sectors, and dividend-paying stocks within those sectors, are the most attractive stocks to buy. Hanlon Managed Income Fund As part of that same filing as above, Two Roads Trust also announced the pending launch of the Hanlon Managed Income Fund, which will attempt to provide current income, capital appreciation, and positive risk-adjusted returns by investing primarily in ETFs, including “long-inversed” products that mimic short-selling. The fund will use technical analysis and trend-following to tactically manage its holdings, attempting to avoid large drawdowns, and when the market signals a pending correction, the fund is designed to “go defensive.”

Fight Rising Yield With These High Yield ETFs

A flurry of strong U.S. economic indicators, especially the better-than-expected May job growth number which is one of the key gauges of the Fed policy determination, set the stage for a September timeline for the Fed rate hike. This, along with rising supplies of debt securities pushed the yield on the benchmark 10-year Treasury note to this year’s high of 2.42% on June 9. In such a backdrop, yield-loving investors might be looking for ways to beat the benchmark Treasury yield and yet enjoy decent capital gains. For them, we highlight some ETF choices that provide extra yield and might be in focus once the Fed puts an end to the rock-bottom interest rate environment. Senior Loan ETFs Senior loans are issued by companies with below investment grade credit ratings. In order to make up for this high risk, senior loans normally have higher yields. Since these securities are senior to other forms of debt or equity, senior loans give protection to investors in any event of liquidation. As a result, default risk is low in this type of bonds, even after belonging to the junk bond space. Moreover, senior loans are floating rate instruments and provide protection from rising interest rates. In a nutshell, relatively high-yield opportunity coupled with protection from the looming rise in interest rates post Fed tightening should help the fund to perform better in the second half of 2014. PowerShares Senior Loan ETF (NYSEARCA: BKLN ) The most popular and liquid fund in this space is BKLN with AUM of $5.7 billion. The fund tracks the S&P/LSTA U.S. Leveraged Loan 100 Index and holds 115 securities in its basket. It has weighted average maturity of 4.71 and average days to reset of just over 35. Though senior loans account for a hefty 83.7% of the assets, high yield securities also make up for 9% share in the basket. The product charges an expense ratio of 65 bps a year and pays out an attractive dividend yield of 3.95%. The ETF has added nearly 1% in the year-to-date timeframe (as of June 9, 2015). Preferred Stock ETFs Preferred stocks are hybrid securities having the characteristics of both debt and equity. The preferred stocks pay the holders a fixed dividend, like bonds. These types of shares normally get priority over equity shares both in case of dividend payments as well as at the time of liquidation if the company fails. Preferred stocks are thus relatively stable and usually exhibit a low correlation with other income generating assets. These products are interest rate sensitive – lesser than the bond space though – but a high yield opportunity might present them as potential bets once the Fed hikes rates. iShares S&P U.S. Preferred Stock ETF (NYSEARCA: PFF ) PFF is perhaps the biggest and the most popular name in the preferred stock ETF space. With total assets of $13.3 billion, it is one of the largest funds in this category. The ETF charges 47 basis points in fees. The fund has returned 1.83% so far this year (as of June 9, 2015) and pays out 6.09% per annum as dividends. The ETF holds 302 securities in all and eliminates concentration risk by allocating a mere 15% of its total assets in its top 10 holdings. Business Development ETFs Business Development Companies (BDCs) are firms that give loan to small and mid-sized companies at relatively higher rates and often grab debt or equity stakes in those companies. BDCs dole out high cash payments together with captivating the equity performance of the borrower. The U.S. law obliges BDCs to hand out more than 90% of their annual taxable income to shareholders. Market Vectors BDC Income ETF (NYSEARCA: BIZD ) The ETF looks to invest in a variety of BDCs which are traded in the American market by tracking the Market Vectors U.S. Business Development Companies Index. The ETF has $82.5 million in AUM. In total, BIZD invests in 29 firms with a relatively high level of concentration in the top names. Ares Capital and American Capital account for 14.6% and 9.9% of total assets, respectively. The fund yields 8.29% annually (as of June 9, 2015) and is up about 3% year to date. Originally posted on Zacks.com

Is It The Right Time For Homebuilder ETFs?

An improving economy and an impressive recovery in the housing market boosted the U.S. homebuilder sentiment in June to a nine-month high. The National Association of Home Builders (NAHB)/Wells Fargo housing market index rose five points from May to 59 in June, in line with the September 2014 reading. The September’s reading was the highest since Nov 2005. The sentiment also exceeded the market expectation of 56 points. Meanwhile, the report also showed that the index that measures sales expectations for the next six months jumped six points to 69 in June. Also, the index measuring buyer traffic increased five points to 44. Moreover, the report revealed that the three-month moving average indexes in the South, Northeast and West witnessed a healthy increase in June. Though the index declined in the Midwest to 54, the reading above 50 indicated that builders were still optimistic for the region. All of these data show that the housing market is set for a strong performance this year overcoming the negative impact of a harsh winter in the first quarter. The Chief Economist at NAHB David Crowe said that readings “are at their highest levels since the last quarter of 2005, indicating a growing optimism among builders that housing will continue to strengthen in the months ahead.” Impressive Housing Recovery Most of the major housing data that released in May were encouraging. While new home sales surged 6.8% in April, construction spending soared to a more than six-year high. Also, Pending Home Sales Index, which measures housing contract activity, gained 3.4% from the previous month to 112.4 in April, hitting its highest level since May 2006. Existing home sales were the only major housing data that failed to increase in April. However, it is speculated that existing home sales in 2015 may reach the highest level since 2006. Separately, a rise in home prices also signaled toward an increase in demand in the housing market. The S&P/Case-Shiller’s 20-City composite index, the leading measure of U.S. home prices, rose 5% year on year in March. Similarly, the 10-City composite index increased 4.7% year on year in March. Economic Improvement After the first-quarter slowdown, several indicators signaled that the economy is gradually gaining strength. According to the U.S. Labor Department, the U.S. economy created a total of 280,000 jobs in May, witnessing the largest job addition since December 2014. Though the unemployment rate marginally rose to 5.5% in May, the rate is expected to decline gradually to Fed’s target this year. Average hourly wages also saw an impressive year-on-year gain of 2.3%, indicating a strong recovery in labor market conditions. Moreover, factors including improving consumer confidence, low oil prices and the prevailing low rate environment have boosted the housing market in recent times. Despite the prospect of a rate hike this year, the outlook for the housing market remains positive for the year. Rising Rate Concerns The mortgage-finance company Freddie Mac reported that the average rate for a 30-year fixed mortgage climbed to an eight-month high of 4.04% for the week ending June 11 from 3.87% from the previous week. This represents the sharpest increase since 2013. However, increase in mortgage rates seems to have a negligible impact on housing as demand remained strong following the concern that rates will continue to move higher. Meanwhile, strong economic data indicates that the economy is back on track in the second quarter, leaving behind the first quarter contraction. This raised the possibility of a rise in interest rates, which have been near zero since the 2008 financial crisis. Analysts are expecting a possible rate hike in September or October this year, which may have a negative impact on the housing market. ETFs in Focus Homebuilder ETFs may see a boost in the near future on the back of a favorable economic environment. However, investors will closely watch the prospect of a rate hike this year and its impact on the housing market. In this scenario, we highlight two homebuilders ETFs that will remain on investors’ radar in the coming days. SPDR S&P Homebuilders ETF (NYSEARCA: XHB ) This fund provides exposure to 37 firms by tracking the S&P Homebuilders Select Industry Index. The fund is also quite popular with $1.7 billion in its asset base while it sees a solid volume of more than 4 million shares a day. None of the firms accounts for more than 3.72% of the total assets. Sector-wise, Homebuilding takes the top spot at about 33% share while Building Products, Homefurnishing Retail and Homefurnishings also have double-digit allocation. XHB charges a fee of 35 bps annually and has a Zacks Rank #3 (Hold) with a High risk outlook. The fund has returned 2.3% over the past three-month period and rose 6.7% this year. PowerShares Dynamic Building and Construction (NYSEARCA: PKB ) This product tracks the Dynamic Building & Construction Intellidex Index, holding 30 securities in its basket. The fund charges 63 bps in fees. Nearly 46% of the fund’s assets are allocated to the top 10 holdings. PKB has amassed $54.5 million in its asset base while it has an average daily volume of around 15,000 shares. The product has a Zacks Rank #3 with a High risk outlook. The ETF has returned 4.2% over the past three-month period and gained 11% in the year-to-date frame. Original Post