Will Investors Accept a New Trade War ETF?

It is said frequently in the investment community that there is an exchange-traded fund (ETF) for almost any imaginable type of strategy. Now there is a so-called trade war ETF for investors to consider.

The Innovation Trade War ETF (NYSEARCA: TWAR) launched without much publicity on June 5, 2019. While the trade war angle persists in the news today, this ETF has been targeted for a while now by a group called MCAM International.

This ETF targets companies that are seen as innovation-rich with state-sponsored patronage and that may benefit from trade wars, based on their governmental sponsorship or partnerships. The ETF sports a 0.81% management fee and, according to its factsheet, seeks to track the total return performance of the Martin Global Innovation Equity (MGIE) Trade War Index.

The same algorithm behind the CNBC IQ 100 also powers this index. M-CAM International developed the index in 2016, and it is said to include 120 companies with large-cap and mid-cap valuations.

As of May 31, 2019, these were the top 10 holdings and their respective weightings:

  • General Electric (2.15%)
  • Cisco Systems (1.54%)
  • International Business Machines (1.38%)
  • Edwards Lifesciences (1.31%)
  • Xerox (1.27%)
  • Advanced Micro Devices (1.13%)
  • Micron Technology (1.13%)
  • Dover (1.00%)
  • Mastercard (0.99%)
  • (0.99%)

For those who have tracked ETF launches for years, this is one may stand out as too specialized, or the holdings might be a topic for debate among investors. Then again, the expanding trade wars of 2018 and 2019 have taken new interest that was never really there in prior years.

As per industry practice, this ETF will pay its transaction costs (commissions and exchange fees). The end result is that a higher portfolio turnover rate should drive up transaction costs and are not reflected in the fund’s annual operating expenses.

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