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Going Deep for Value Brings Success for This New ETF

Though not spectacular, at least not yet, in asset-gathering terms, 2014 is shaping up to be another solid year for new exchange traded funds.

As of Oct. 16, there had been 155 new product launches in 2014, but just 16 have topped $75 million in assets under management while 11 have crossed $100 million in AUM, according to Morningstar data. [Another Decent Year for New ETFs]

With a spate of launches this week, the number of new ETFs that have debuted this year is over 160. Perhaps more importantly is the number of successful launches has grown by at least one thanks to the rapid success of the Deep Value ETF (DVP) , which was brought to market on Oct. 8 by Exchange Traded Concepts, LLC and Tiedemann Wealth Management.

The new ETF tracks “TWM Deep Value Index, an advanced beta strategy created by Tiedemann Wealth Management that aims to provide investors with concentrated exposure to attractively valued dividend-paying companies with positive earnings, strong free cash flows and solid balance sheets,” according to a statement.

Investors have rapidly warmed to DVP’s story as one ETF liquidity provider noted Wednesday morning that the ETF has already amassed $150 million in assets under management, a number exceeded by just four other ETFs that have launched this year.

DVP’s timing appears good as the ETF has come to market during a year in which investors have allocated billions to value ETFs. For example, the Vanguard Value ETF (VTV) and the iShares S&P 500 Value ETF (IVE) have added $2.4 billion and $1.2 billion in new assets, respectively. The Schwab U.S. Large-Cap Value ETF (SCHV) has tacked on nearly $300 million in new assets. http://www.etftrends.com/2014/05/dont-forget-these-value-etfs/

DVP’s underlying index “is comprised of 20 undervalued dividend paying stocks within the S&P 500 Index with solid balance sheets, earnings and strong free cash flow. The companies within the Index are weighted based on a rules-based assessment of their valuations so that stocks that are most attractively valued receive a higher weight,” according to TWM Funds.

The emphasis on value is apparent as DVP sports a P/E ratio of 13.7 compared to about 17 for the S&P 500. Holdings include Frontier Communications (FTR), Dow component Verizon (VZ), Computer Sciences (CSC) and Hewlett-Packard (HPQ).

The consumer discretionary, telecom and technology sectors combine for over two-thirds of the new ETF’s weight.

“With U.S. corporate balance sheet strength at its highest level in over 30 years, CEOs are increasingly under pressure to maximize shareholder value. The TWM Deep Value Index was developed to provide exposure to undervalued, dividend paying stocks where value creation is expected to come from improving fundamentals, investor activism, or merger and acquisition activity,” said Paul Buongiorno, Managing Director and Chief Investment Strategist at Tiedemann Wealth Management, in the statement.