Latest Launches

ETF would give retail access to cat bonds

The ESG product would seek to expand disaster coverage and provide pricing transparency

ETF provider Impact Shares has filed to launch its fifth product, a fund that would invest in reinsurance securities tied to natural disasters.

That fund, the Impact Shares Climate Risk Reinsurance ETF, would use “a proprietary methodology based upon qualitative and quantitative elements, including peril type, geography, payout trigger and issuer”, according to an initial prospectus filed Tuesday with the Securities and Exchange Commission.

Among the goals of the product are increasing capacity for natural disaster insurance for people who will be most affected by climate change, as well as drawing attention to the pricing practices for the bonds that back the insurance, Impact Shares CEO Ethan Powell said.

The ETF would trade on NYSE ARCA with the ticker ROAR. It would invest in catastrophe bonds, whose return of principal and interest payments depend on claims not being made in connection with natural disasters including hurricanes and floods.

“The cat-bond asset class currently doesn’t have any listed or retail products at all,” Powell said, noting that those bonds are usually held by hedge funds and institutional investors. “It’s like a floating-rate fixed income [product], where you’re removing the credit risk premium and inserting weather risk premium.”

Demand for catastrophe bonds “is a barometer for the true cost of increased climate volatility”, he said.

Following Hurricane Ian in Florida in late September, about a third of the catastrophe bond market was repriced, seeing increases of between 8% and 12%, Powell said.

“We want to bring transparency to that. We want to bring more dialog to that,” he said.

Powell, chief investment officer at Brookmont Capital Management, would serve as portfolio manager for the ETF.

Impact Shares’ existing line of products includes The NAACP Minority Empowerment ETF, YWCA Women’s Empowerment ETF, Sustainable Development Goals Global Equity ETF and Impact Shares Affordable Housing MBS ETF.

The latter ETF, which launched last year, was aimed at increasing capacity for lending, Powell said. The Climate Risk Reinsurance ETF “has similar characteristics”, and the underlying bonds “help defray the cost of large-scale catastrophic” events, he said.

The yield on cat bonds has been about 7%, with a 4% default rate, he said, adding that the estimated yields on the bonds in the ETF will be in the low double digits.

The ETF could help people better understand the true cost of the reinsurance that backs catastrophe insurance in a world faced with more frequent, more intense natural disasters as a result of climate change, Powell said.

“That trend is something that the public needs to know about. We also anticipate that insurers will use this more frequently to defray their risk that they view as being difficult to price.”

Sustainable Leaders files for energy transition ETF

It appears to be the company's first retail fund

Institutional manager Sustainable Leaders Investment Management is prepping an ETF that would invest in companies that are part of the energy transition.

The SL Transition Infrastructure and Innovation ETF would hold stocks of “transition infrastructure companies”, which include those involved in “lower-carbon energy production, distribution, storage, transport, and associated supply chain, material provider and technology companies”, a filing made Wednesday with the Securities and Exchange Commission states.

Subadviser to the fund would be Vident Investment Advisory, and the portfolio manager is listed as Sustainable Leaders CIO Gregory LeBlanc.

The ETF would have total expenses of 75 basis points, according to the initial prospectus.

The product appears to be the first retail fund that Boston-based Sustainable Leaders would provide.

Calvert preps new emerging markets fund

It comes in addition to two US mutual funds the company has for emerging markets

Calvert Research and Management has filed for a new emerging markets fund that would be subadvised by parent firm Morgan Stanley.

The sustainable investment company filed an initial prospectus last Friday with the Securities and Exchange Commission for its Calvert Emerging Markets Focused Growth Fund. The mutual fund would be available in several share classes: A, C, I and R6.

It would invest at least 80% of net assets in stocks of companies based in emerging markets and meet responsible investing criteria.

The subadviser to the fund is listed as Morgan Stanley Investment Management, with Vishal Gupta as portfolio manager.

Currently, Calvert offers other emerging markets mutual funds in the US, including its $73m Emerging Markets Advancement Fund, which is managed in house, and $2.3bn Emerging Markets Equity Fund, subadvised by Federated Hermes.

The fund could be able to launch at least 75 days after the filing was made.

iShares files for three more ‘ESG aware’ ETFs

The world’s biggest asset manager keeps rolling out sustainability themed products

BlackRock’s iShares is prepping three new “ESG Aware” ETFs, regulatory filings show.

The forthcoming products include the iShares ESG Aware MSCI USA Value, MSCI USA Growth and ICE-HIP Muni Bond ETFs. Those add to a handful of other ETFs in the company’s ESG-aware line, which are “funds that balance seeking a similar risk and return to the relevant broad market while seeking a more sustainable outcome”, according to iShares.

The firm currently has seven ETFs in that category, the biggest of which being the iShares ESG Aware MSCI USA ETF, which represents $20bn in assets. That fund was the largest passively managed sustainable fund in the US last year and had raked in $8.2bn, more than double that of any other sustainable fund saw in new money, according to data from Morningstar Direct. The second-biggest sustainable fund by net new flows, at $3.5bn, was the iShares ESG Aware MSCI EAFE ETF.

The ETF provider puts its sustainable products into four categories: screened, broad ESG, thematic ESG and impact. Broad ESG includes the most products – 22 – and those are spread across five product suites: ESG aware, ESG advanced, ESG leaders, ESG aware allocation and factors plus ESG.

The iShares ESG Aware MSCI USA Value ETF will seek to track performance of the similarly named index, investing in large- and mid-cap US stocks with value and positive ESG characteristics, according to the filing.

Meanwhile, the iShares ESG Aware MSCI USA Growth ETF would hold large- and mid-cap US stocks with growth potential and good ESG traits.

The iShares ESG Aware ICE-HIP Muni Bond ETF would track the ICE HIP ESG US National Municipal Index, which includes investment-grade muni bonds, favoring higher ESG ratings.

Expense ratios for the ETFs were not listed on the initial prospectuses filed with the Securities and Exchange Commission.

Portfolio managers on the value and growth ETFs are Jennifer Hsui, Greg Savage, Paul Whitehead and Amy Whitelaw.

James Mauro and Karen Uyehara are the portfolio managers on the muni bond ETF.

AXS ETF targets sustainable economy

The firm has partnered with Green Alpha for the new ETF

AXS Investments has launched an actively managed ETF designed to invest in companies that will be part of what it calls “the rapidly unfolding and expanding sustainable global economy”.

The asset manager is partnering with Green Alpha Investments, which serves as the subadvisor to the fund, the AXS Green Alpha ETF. Green Alpha is also the subadvisor on the existing $1.4m AXS Sustainable Income Fund.

The ETF invests at least 80% of its net assets in sustainable companies, which it defines as those seeking “to mitigate global sustainability systemic risks” and those with strong growth potential. Those risks include climate change, natural resource depletion and human disease, among potential others, according to the fund’s prospectus.

Portfolio managers on the new ETF are AXS’ Parker Binion and Travis Trampe and Green Alpha’s Garvin Jabusch and Jeremy Deems.

The ETF’s expense ratio is 100 basis points.

Hennessy to add ESG ETF from Stance Capital

Stance will remain as a subadvisor to the $40m ETF

Hennessy Funds is preparing to add its first ETF to its line, a semitransparent ESG product whose assets it is acquiring from Stance Capital.

The acquiring firm announced the agreement in August, with plans to rename the Stance Equity ESG Large Cap Core ETF as the Hennessy Stance ESG Large Cap ETF. Hennessy filed an initial prospectus for the fund September 23 with the Securities and Exchange Commission.

The ETF, which is actively managed, does not disclose its holdings daily. Instead, like other semitransparent ETFs, it publishes a “portfolio reference basket” to help the market price of its shares near net asset value.

The fund, which is a year and a half old and currently represents $40m, invests at least 80% of its net assets in stocks of large cap companies that meet ESG criteria determined by the portfolio managers. Hennessy will be the investment manager to the ETF when the transition goes into effect. Stance Capital and Vident Investment Advisory will serve as subadvisors. Portfolio managers will be Stance’s Bill Davis and Kyle Balkissoon and Vident’s Rafael Zayas and Ryan Dofflemeyer.

The ETF will have net expenses of 85 basis points.

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