The Long And Short Of A New ETF
In what might be the antithesis of the passive, index-based wave that has propelled the rapid growth of exchange-traded funds, the Active Alts Contrarian ETF (SQZZ) is an actively managed product that takes long positions in heavily shorted stocks.

The fund relies on a proprietary investment process that identifies equities believed to have a higher potential for capital appreciation resulting from a short squeeze. Short selling aims to profit from falling share prices. A heavily shorted stock can be hit by a short squeeze when unexpectedly good news—such as a surprisingly strong earnings report—causes the share price to rise and sends short sellers scrambling to cover their bets, often at a loss, which further drives share price appreciation.

The SQZZ fund’s investment process was developed by Active Alts, a Westport, Conn.-based registered investment advisor focused on bringing liquid alternative strategies to the ETF space. The company says SQZZ can potentially benefit investors two ways. In one instance, it invests in companies with good fundamentals that have been shorted. These shorts can be squeezed, and the companies can benefit from capital appreciation. In the second instance, the fund can benefit from lending out hard-to-borrow securities that produce income through a dividend that could boost total returns.

SQZZ has a net expense ratio of 1.95%, which portfolio manager Brad Lamensdorf says is commensurate with the type of active management that the fund requires. And he notes it’s cheaper than liquid alternatives in the mutual fund world, and much cheaper than alternative hedge fund strategies.

First Marijuana ETF Lights Up
One of North America’s fastest-growing industries finally got its first exchange-traded fund when the Horizons Medical Marijuana Life Sciences ETF (HMMJ) began trading on the Toronto Stock Exchange in early April (the fund’s coming out announcement was in late March).

HMMJ, the first product of its kind, offers direct exposure to North American-listed stocks from companies engaged in medical marijuana bioengineering and production. The fund tracks the North American Medical Marijuana Index, composed of companies with significant business activity in the marijuana industry.

The market-cap-weighted fund will carry an expense ratio of 0.75%. U.S. investors can buy the fund through brokerages able to purchase Canadian securities.

ETF Shows Who’s Boss
According to various studies, companies whose founders remain as CEO or hold some other prominent operational role tend to create more financial value or better stock market performance than companies where the founder no longer provides a guiding hand.

Global X Funds took that notion and ran with it, launching the Founder-Run Companies ETF (BOSS), which it says is the first ETF seeking to capture the returns of those companies run by their founders. It charges an expense ratio of 0.65%.

As part of its investing thesis, Global X says company founders tend to have more skin in the game since their significant personal wealth is tied to the companies they lead. More long-term value creation comes from their innovation and entrepreneurialism.

Paving The Way For Infrastructure Investing
Investors have been drooling over infrastructure ever since Donald Trump was elected president. And why not, given his stated aim to spend $1 trillion to build and repair the nation’s roads, bridges, airports, ports and other public works projects?

The Global X U.S. Infrastructure Development ETF (PAVE) sets it sights on U.S.-listed companies that address domestic infrastructure building needs. That distinguishes it from existing infrastructure-related ETFs that have a more global focus and a heavy tilt toward infrastructure owners, such as utility and energy companies, rather than builders.

The fund’s top sectors are electrical components and equipment; construction and engineering; steel; railroads; trading companies and distributors; and industrial machinery. The net expense ratio is 0.47%.

Much has been made about the age, inadequacy and various states of disrepair of vital infrastructure in the U.S. Most of the country’s infrastructure dates from the post-World War II period, and while nominal infrastructure spending has risen at an annualized rate of 3.6 percent during the past 15 years, Global X research has found that the number is actually minus 0.2% after accounting for inflation and real GDP growth.

Some people doubt the long-term prospects of Trump’s proposed infrastructure spending spree; in some circles, the plan is cast as a potential boondoggle. But Global X says infrastructure spending already has a jump start thanks to the Fixing America's Surface Transportation Act, otherwise known as the FAST Act, a $305 billion, five-year spending law signed by President Obama in December 2015 that aims to tackle a host of infrastructure needs across various sectors in the U.S.

Hartford Funds Launches Two Actively Managed Bond ETFs
Hartford Funds debuted two actively managed, fixed-income exchange-traded funds—the Hartford Quality Bond ETF (HQBD) and the Hartford Corporate Bond ETF (HCOR).

According to the company, the Hartford Quality Bond ETF seeks to maximize total return while providing a high level of current income consistent with prudent investment risk. The fund is a conservative core bond fund with an emphasis on investment-grade debt, including U.S. government and mortgage-backed securities. The expense ratio is 0.39%.

The Hartford Corporate Bond ETF offers corporate bond exposure through a bottom-up strategy of predominantly investment-grade corporate bonds and seeks to provide total return, with income as a secondary objective. It sports an expense ratio of 0.44%.

The funds are sub-advised by Wellington Management Company LLP.

Commodities In Focus
ProShares rolled out what it says are the first daily 3x leveraged and inverse crude oil exchange-traded funds. Both the ProShares UltraPro 3x Crude Oil ETF (OILU) and the ProShares UltraPro 3x Short Crude Oil ETF (OILD) are benchmarked to the Bloomberg WTI Crude Oil Subindex.

The OILU fund is used by investors seeking magnified gains when oil trends upward. Of course, results would also be magnified in the opposite direction if the benchmark goes south. The OILD fund is intended to hedge against declines in the benchmark by seeking to profit when oil prices drop.

Both funds are intended to be short-term bets on the price of oil, and both carry an expense ratio of 0.95%.

Elsewhere in commodities, ETF Securities launched three exchange-traded funds aimed at providing low-cost, broad exposure to commodities while making tax season easier for investors and their tax preparers.

The ETFS Bloomberg All Commodity Strategy K-1 Free ETF (BCI), the Bloomberg All Commodity Longer Dated Strategy K-1 Free ETF (BCD) and the Bloomberg Energy Commodity Longer Dated Strategy K-1 Free ETF (BEF) are structured as ’40 Act funds, which entail tax reporting with 1099 tax forms instead of the K-1 forms common in many types of commodity investment structures. K-1s can be a pain for investors and the people who do their taxes—typically financial advisors and accountants—because the forms are often sent late in the tax season after the taxes are filed, requiring additional work.

The BCI and BCD funds follow indexes composed of 22 commodities in five sectors, and sector exposure is capped at 33%. Both funds have expense ratios of 0.29%. BEF is tied to an energy-focused index consisting of crude oil, heating oil, unleaded gasoline and natural gas. Its expense ratio is 0.39%.

Finally, Direxion has brought to market the Direxion Auspice Broad Commodity Strategy ETF (COM), which tracks a rules-based index with exposure to 12 commodities. The index can go long on individual commodities when prices are rising, or can go to cash (or U.S. Treasury bills) on individual commodities when prices are falling. The goal is to have a lower risk profile than long-only commodity strategies.

The COM fund is structured as a ’40 Act fund, which means no K-1 tax form. Another highlighted feature is a “smart” contract roll approach designed to select cost-effective futures contracts to roll into upon expiration of the current contracts.

The fund’s net expense ratio is 0.70 percent.