SQZZ, which debuted Wednesday, is the first ETF to focus on stocks in which traders have amassed large bearish positions, which can in turn result in those stocks being subject to short squeezes. The new ETF is managed by Brad Lamensdorf, who also manages the AdvisorShares Ranger Equity Bear ETF HDGE.
Introducing NASDAQ's New Squeeze
SQZZ “seeks capital appreciation by investing in companies with solid fundamentals that have very large short positions and are subject to a short squeeze. Also, as a secondary investment strategy, Lamensdorf intends to lend out the hard-to-borrow securities in an effort to earn a stream of monthly income which has the potential to enhance the total return,” according to a statement issued by Connecticut-based Active Alts.
SQZZ does not have to be fully invested at all times. In fact, the new ETF comes to market with about 81 percent of its portfolio in cash. The new ETF has other requirements, including holdings with a minimum market value of $250 million and average daily volume in dollar terms of at least $1 million.
“Moreover, until a short squeeze materializes, SQZZ investors earn current income by receiving the majority of the interest from banks who are paid by borrowers of the security,” said Active Alts. “Typically, when securities are loaned from an investor’s margin account, the investor earns nothing— the payment is kept by the bank or broker. SQZZ is not typical; when it loans securities, the bank will pay the ETF the majority of the interest it may earn, that income goes to SQZZ investors in the form of a dividend.”
None of SQZZ's equity positions account for more than 1.9 percent of the new ETF's weight. Those positions include Dow component General Electric Company GE, Sprint Corp S, Chesapeake Energy Corporation CHK and Transocean LTD RIG.
HDGE, Lamensdorf's other ETF, has nearly $175 million in assets under management. SQZZ has total annual operating expenses of 1.95 percent, according to issuer data.Related Links:
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