Huntington Asset Advisors, a unit of Columbus, Ohio-based regional bank Huntington Bancshares, today rolled out an actively managed domestic equity ETF that rotates exposure to market capitalization tiers of the S'P 1500 universe and to industry sectors as it looks to generate capital appreciation.
The launch of the Huntington U.S. Equity Rotation Strategy ETF (HUSE) is the culmination of a long process that started more than two years ago when Huntington said it planned to roll assets of an existing mutual fund into the equities ETF it is launching today. That didn’t happen, though other mutual fund companies are probably watching Huntington closely.
That’s because Huntington isn’t giving up, and will continue to press for permission to seed ETFs with mutual fund assets. Getting a green light from U.S. regulators to do so could unleash a wave of asset migration from the mutual fund space into ETFs as other mutual fund providers follow suit.
But for now, Huntington, which manages 26 mutual funds and has more than $3 billion of assets under management, has made peace with the glacial pace of U.S. securities regulators and found other means to bring ETFs to market. The SEC never weighed in on the feasibility of Huntington’s original idea.
So, instead of seeding HUSE with capital from a similar mutual fund, the company is rolling out the ETF on its own. The mutual fund it had hoped to use for seed money for the ETF remains in existence.
It’s hardly news that mutual fund firms are looking to claim a stake in the booming ETF market. In the past few years, many big-name mutual fund firms have filed for permission to market ETFs, which makes Huntington’s request that more relevant.
Huntington’s Rotation Strategy
HUSE, the new ETF, owns small-, mid- and large-cap securities picked from the S'P 400, S'P 600 and S'P 500 indexes.
The fund also allocates across all 10 sectors, focusing on those that look prospective in certain market conditions and underweighting the underperformers. That exposure shifts as the portfolio manager adjusts to different market conditions.
The fund, which is designed for the “long-term investor seeking capital appreciation,” has a net annual expense ratio of 0.95 percent, including a fee waiver without which it would cost 1.29 percent.
HUSE will cap allocation to an individual industry at 25 percent of the mix, and a single company may be represented in more than one industry at a time, the company said in its most recent prospectus . It also said that the fund should see moderate-to-high share-price volatility.
HUSE is the firm’s second ETF. The first was a “green” equity strategy launched last month that invests in ecologically focused companies. The Huntington Ecological Strategy ETF (HECO) has $5.54 million in assets and also has a net expense ratio of 0.95 percent after fee waivers are taken into account.
At the time the article was written, the author had no positions in the securities mentioned. Contact Cinthia Murphy at email@example.com.
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