Nashville is home to the Grand Ole Opry, Vanderbilt University and the state capital of Tennessee. And, evidently, enough corporations in the greater metro region to support a stand-alone exchange-traded fund.

Late last month, Nashville-based LocalShares Investment Trust filed a registration statement with the Securities and Exchange Commission for a Nashville-focused ETF. The fund would track the LocalShares Nashville Index made up of publicly-traded companies headquartered in the Nashville area.

The proposed fund would be listed on the NYSE Arca exchange. Fund expenses would be capped at 49 basis points until at least May 1, 2014.

LocalShares is in hush-hush mode during the filing period, and their spokesman said they're not at liberty yet to discuss specifics about the index's components.

As per the filing statement, the ETF would normally invest 80% of its total assets in the LocalShares Nashville Index. Companies in the index are based in the seven county Nashville region, and must meet certain requirements including a market capitalization of at least $100 million during the 25 days preceding the initial inclusion date, as well as an average daily volume exceeding 50,000 shares for the preceding three months.

The LocalShares Nashville Index is weighted on such data as earnings, sales, profitability, price and yield. According to the SEC filing, the Nashville ETF would be a multi-cap fund that employs a passive indexing strategy.

The fund's investment advisor is LocalShares Inc. The sub-advisor is Decker Wealth Management LLC in Nashville.

The fund's registration statement highlights several risks, including geographic concentration and healthcare sector risks. The latter stems from the concentration of the healthcare industry in middle Tennessee, and the fund is expected to invest "a relatively large percentage of its assets in the healthcare sector," according to the filing.

The Nashville region is home to four members of the Fortune 500. Three of them--HCA Holdings, Community Health Systems and Vanguard Health Systems--are in the healthcare field. The fourth is discount retailer Dollar General.

Country-specific ETFs are common, but geographic-centric ETFs focused on U.S. cities or states are rare. In 2010, Geary Advisors closed the Texas Large Companies ETF and the Oklahoma ETF after a short run due to insufficient assets.

But the index provider to those funds says the problem was more about poor promotion than investor disinterest. "They [Geary] never had the marketing people to push the product," says Scott Sacknoff, index manager at SPADE Indexes, which created and still maintains the SPADE Oklahoma and SPADE Texas indexes that underpinned the two failed ETFs. "I still get calls from individual brokers asking how they can put money into this."

Sacknoff notes that certain states or regions make more sense than others to have their own ETF. "There aren't enough companies in Kansas to have its own fund," he says. He adds that people will invest in a state-centric or regional fund for two reasons--either from a sense of local pride or because it has a basket of companies that do something that others don't.

He says Oklahoma has a strong sense of local pride and an energy-focused corporate landscape. "Oklahoma provided higher beta than the average energy fund," Sacknoff says. "When energy is up, Oklahoma goes up real fast, and vice versa."

And Texas has a ton of local pride, plus an economic base that, while heavy on energy, is also more diversified than Oklahoma.

As for the Nashville ETF, if it ever comes to market the question will be whether it can generate any interest either locally or beyond.

--Jeff Schlegel