Investment Product and Service Launches

First Trust Introduces Dorsey Wright Momentum Plus ETFs; T. Rowe Price Closes 23-Year-Old Fund; Fidelity Merges Active and Passive Funds in New TDF Suite; and more.

First Trust Advisors L.P. (First Trust) has started trading the First Trust Dorsey Wright Momentum Plus exchange-traded funds (ETFs) on The Nasdaq Stock Market LLC.

The funds seek investment results that correspond generally to the price and yield—before the funds’ fees and expenses—of the Dorsey Wright Momentum Plus Indexes. The rules-based equity indexes are designed to select securities based on individual stock momentum using Dorsey, Wright & Associates’ (DWA) proprietary relative strength methodology, plus a fundamental factor (value, dividend yield or volatility).

“In our view, the First Trust Dorsey Wright Momentum Plus ETFs are effective tools for investment advisers looking to target exposure to a combination of relative strength—or momentum—with other well-known fundamental factors, including value, dividend yield, and low volatility,” says Ryan Issakainen, CFA, senior vice president, Exchange-Traded Fund strategist at First Trust.

Relative strength is a ranking system used to measure a security’s price momentum relative to its peers. DWA believes combining relative strength with a factor-based investing strategy provides the ability to hone in on a desirable characteristic of a stock and the potential for more attractive excess returns than the individual strategies may achieve separately from one another. “Dorsey Wright’s research on relative strength is widely followed and we are pleased to offer these funds which incorporate their insights,” says Issakainen. The three ETFs are First Trust Dorsey Wright Momentum & Dividend ETF; First Trust Dorsey Wright Momentum & Value ETF; and First Trust Dorsey Wright Momentum & Low Volatility ETF.

Prior to September 6, the First Trust Dorsey Wright Momentum & Dividend ETF’s investment objective was to seek to track the Richard Bernstein Advisors Quality Income Index. The fund, formerly known as the First Trust RBA Quality Income ETF, previously traded under the ticker symbol QINC.

T. Rowe Price Closes 23-Year-Old Fund

T. Rowe Price has closed its Emerging Markets Stock Fund, along with similar portfolios, to new investors on September 4. Although the fund is closed to new investors, investments from current shareholders and retirement plans that currently offer the Emerging Markets Stock Fund, and hold a plan name account with the funds, will continue to be accepted.

The fund launched in 1995 and seeks long-term growth of capital through investments, primarily in the common stocks of companies located (or with primary operations) in emerging markets. Gonzalo Pangaro has managed the fund since 2009.

“Closing the fund to new investors will protect current clients by maintaining the integrity of the overall strategy,” says Pangaro. “Delivering excellent long-term performance is always our primary focus, and restricting inflows will preserve our ability to best invest in accordance with the objectives of the strategy. This decision reflects our commitment to current shareholders and was made for their benefit.”


Fidelity Merges Active and Passive Funds in New TDF Suite

Fidelity has launched 13 Fidelity Freedom Blend Funds, combining the use of active and passive management in the same target-date fund (TDF) suite.

The new funds are offered through a series of nine retail and adviser share classes, some including revenue sharing and some not. According to the firm, the array of share classes is designed to deliver a high degree of client choice and flexibility. 

The Fidelity Freedom Blend funds will be co-managed by Andrew Dierdorf and Brett Sumsion, who are supported by Fidelity’s global investment and research capabilities. The pair also co-manage other asset allocation funds, including the existing Fidelity Freedom Funds. 

As Dierdorf explains, the mix of active and passive investments will vary based on the target year and market conditions, with passive investments generally expected to range between 20% and 60% of each fund’s portfolio.

“We will tend to use active investments in the parts of the market we view to be less efficient and less information rich,” Dierdorf says. “We will use more active management in markets where there is a wider breadth of opportunity, and where Fidelity’s capabilities are strongest. There will be more index exposures in places where there is less alpha opportunity, for example in government bonds.” 

As Dierdorf describes, active management will be used prevalently in U.S. small cap investments, emerging markets equity and in securitized corporate bond investments.

Each Freedom Blend Fund will launch with nine share classes offering different expense levels. For example, expenses for the retail and I share classes will range from 0.46% to 0.54% depending on the target year, while the K6 and Z6 share classes will range from 0.26% to 0.34%.

Coinciding with the release of the blended TDFs, Fidelity Investments is also introducing a new, reduced fee schedule for the Fidelity Institutional Asset Management (FIAM) Blend Target Date Commingled Pools. According to the firm, current FIAM Blend Target Date customers are now eligible for either a lower price in an existing share class or a less expensive share class option, depending on their current FIAM target-date assets. The new pricing was effective September 1.


SSGA Decreases ETF Expense Ratios

State Street Global Advisors has reduced expense ratios for the SPDR Bloomberg Barclays International Treasury Bond exchange-traded fund (ETF), SPDR Nuveen S&P High Yield Municipal Bond ETF (HYMB), SPDR SSGA Income Allocation ETF (INKM) and SPDR SSGA Multi-Asset Real Return ETF (RLY).

Effective September 4, the expense ratios of the four funds were lowered to anywhere between .10% to .20%, depending on the fund. The SPDR Bloomberg Barclays International Treasury Bond ETF and SPDR Nuveen S&P High Yield Municipal Bond ETF each have new net expense ratios of 0.35%, while the SPDR SSGA Income Allocation ETF and SPDR SSGA Multi-Asset Real Return ETF have revised ratios of 0.50%.

“We are constantly evaluating the SPDR ETF lineup to meet client demand,” says Noel Archard, global head of SPDR Product at State Street Global Advisors. “In reducing the expense ratios of these four SPDRs we help lower the total cost of ownership for our clients and ensure the funds are well positioned for growth in the current market.”


Vanguard Creates ETF for Global Bond Investments

Vanguard has launched a domiciled index exchange-traded fund (ETF), offering investors access to the global investment-grade bond universe in a single fund. The Vanguard Total World Bond ETF (BNDW) trades on Nasdaq and seeks to track the Bloomberg Barclays Global Aggregate Float Adjusted Composite Index. It has an estimated expense ratio of 0.09%.

According to the firm, the fund is structured as an ETF of ETFs, investing directly in two Vanguard building-block bond ETFs: Vanguard Total Bond Market ETF (BND) and Vanguard Total International Bond ETF (BNDX). This structure enables the Vanguard Total World Bond ETF to achieve immediate scale by using existing exposure from the underlying ETFs and is expected to result in tighter bid/ask spreads and lower operating expenses than investing directly in the benchmark’s constituents. The approach is similar to Vanguard Total Corporate Bond ETF (VTC), which launched in November 2017, and invests in Vanguard’s existing short-, intermediate-, and long-term corporate bond ETFs.

“With BNDW, Vanguard is the first firm to offer U.S. investors a single index product with exposure to the entire global investment-grade bond universe,” says Vanguard Chief Investment Officer Greg Davis. “It’s a simple, convenient, and low-cost way to obtain the diversification benefits offered by bonds of many countries and issuers.”


DWS Group Adds Socially Conscious Money Market Fund

DWS Group has built a money market fund available in the U.S. to apply ESG (environmental, social and governance) criteria. Named the DWS ESG Liquidity Fund (ESGXX), DWS says this fund will invest in high-quality, short-term, U.S. dollar-denominated money market instruments paying a fixed, variable or floating interest rate, while also filtering for various ESG factors using DWS’s proprietary software–the ESG Engine.

“As a global asset manager, it is crucial for DWS to enable our clients to invest in a sustainable future by incorporating ESG factors into their global investment process across asset classes,” says Sonelius Kendrick-Smith, head of Liquidity Solutions, Americas. “Through the DWS ESG Liquidity Fund, investors will now be able to take advantage of our proprietary ESG Engine software while effectively managing their liquidity.”

 The DWS ESG Liquidity Fund buys U.S. government debt obligations, money market instruments and other debt obligations that present minimal credit risks. In addition to considering financial information, the security selection process also evaluates a company based on ESG criteria which considers multiple factors, including level of involvement in controversial sectors and weapons; adherence to corporate governance principles; ESG performance relative to a peer group of companies; and efforts to meet the United Nations’ Sustainable Development Goals.