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Bipartisanship In An ETF

April 20, 2018 8:10 am
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Bipartisanship In An ETF

EventShares was the first issuer of exchange-traded funds appeal to investors' political proclivities by introducing actively managed funds designed to benefit from the policies of both major U.S. political parties. The firm also previously introduced the EventShares U.S. Tax Reform Fund, an active ETF designed to benefit from the recently passed tax reform legislation.

However, the EventShares U.S. Tax Reform Fund is being renamed the EventShares U.S. Policy Alpha ETF (BATS: PLCY) while the EventShares Republican Polices Fund (GOP) and the EventShares Democratic Policies Fund (DEMS) will be liquidated on Friday, April 27.

"It has been our view from the start that policy is an investable leading indicator, and we have seen that thesis play out in the outperformance of GOP and DEMS since launch, with both market prices as of April 18, 2018 exceeding the returns of the S&P 500 since inception and through some turbulent market conditions,” said Ben Phillips, chief investment officer at EventShares, in a statement.

What Happened

Although the current political environment in the U.S. is highly contentious, investors didn't use party preference to embrace DEMS or GOP, forcing the closure of those funds. However, the spirit of those ETFs isn't dead as the new PLCY will embrace some of the cornerstones of DEMS and GOP.

Neither DEMS nor GOP were intended to be instruments for investors to express political views, but EventShares acknowledged that was the landscape the ETFs eventually faced.

Why It's Important

Like its predecessors, the new PLCY is actively managed. PLCY's “objective is to seek capital appreciation by investing in market segments impacted by U.S. government policy and regulation. Alpha is a measure of the excess (active) return of an investment relative to the return of a benchmark index. An alpha of 1% means the fund's return was 1% better than the market,” according to the issuer.

The new ETF allocates a combined 46 percent of its weight to the industrial and healthcare sectors. Financial services and technology stocks combine for 31 percent of PLCY's roster. PLCY charges 0.85 percent per year, or $85 on a $10,000 stake.

What's Next

DEMS and GOP will cease taking creation orders on April 24 and will be delisted. PLCY will aim for a brighter future with some idea taken from its predecessor funds.

"While tax reform and related policies will continue to play a significant role in the fund, there will be other drivers as well, including trade, defense, healthcare, education, border security, and environmental concerns," said EventShares.

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