Swimming With the Sharks: Mr. Wonderful Launches an ETF
July 14th, 2015 at 10:00am by Todd Shriber
You’re not dead to him, at least not yet, but you may be if you don’t buy his first exchange traded fund. Kidding aside, “Shark Tank” star Kevin O’Leary makes his initial foray into the ETF business today with the debut of the O’Shares FTSE US Quality Dividend ETF (NYSEArca: OUSA).
“O’Shares was formed by Connor O’Brien, CEO, and ABC Shark Tank investor Kevin O’Leary, Chairman, who together also co-founded O’Leary Funds, an investment fund manager focused on income, capital appreciation and wealth preservation that has grown to approximately $900 million in assets under management,” according to a statement.
O’Leary’s ETF debut, with a passive fund no less, is a departure from the firm’s usual strategies, which include 22 mutual funds and four closed end funds.
O’Leary, also known by “Shark Tank” fans and contestants as Mr. Wonderful for his unbridled candor, has drawn the ire of more than a few contestants on the show for offering deals centered on long-term royalty payments. In other words, O’Leary is looking for reward for the risk he is taking on various entrepreneurs and those royalties, which can be seen as equivalents to dividends, compensate him for that risk.
Fortunately for investors, O’Leary is a devoted dividend investor. He has even said he would pass on Google (NasdaqGS: GOOG) until the Internet giant starts paying a dividend and several of his firm’s mutual funds are dividend-focused.
The O’Shares FTSE US Quality Dividend ETF cements O’Leary’s dividend commitment. OUSA tracks the FTSE US Qual / Vol / Yield Factor Index, an expansion of FTSE Russell’s FTSE Global Factor Index Series. The index seizes on three prominent themes in the ETF community: Dividends along with the low volatility and quality factors. [The Right Dividend ETF for the Times]
“We believe now is the time to provide our time tested investment principles though a simple, transparent, efficient and cost effective index-based investment product. So we are launching our new family of global index-based ETFs for investors and joining forces with leading global index provider FTSE Russell,” said O’Leary in a statement issued by FTSE Russell.
OUSA’s underlying index is home to eight Dow components with AT&T (NYSE: T) and Philip Morris (NYSE: PM) being the outliers. Johnson & Johnson (NYSE: JNJ), Exxon Mobil (NYSE: XOM) and Apple (NasdaqGS: AAPL) each account for more than 5% of the index’s weight, according to FTSE data.
The index’s three largest sector weights are consumer goods, healthcare and technology. Technology has been one of the primary drivers of S&P 500 dividend growth in recent years. OUSA also offers rising rates protection as utilities, a sector notoriously vulnerable to hawkish changes in Federal Reserve policy, is one of the ETF’s smallest sector allocations.
O’Shares is expected to launch more ETFs based on the same FTSE Russell multi-factor methodology, including developed markets and developed Asia funds.
Chart Courtesy: FTSE Russell
Tom Lydon’s clients own shares of Apple. Todd Shriber owns shares of JNJ.
Before you invest in O’Shares Investments℠ funds, please refer to the prospectus for important information about the investment objectives, risks, charges and expenses. To obtain a prospectus containing this and other important information, please visit www.oshares.com to view or download a prospectus online. Read the prospectus carefully before you invest. There are risks involved with investing including the possible loss of principal.
Concentration in a particular industry or sector will subject the Funds to loss due to adverse occurrences that may affect that industry or sector. The funds may use derivatives which may involve risks different from, or greater than, those associated with more traditional investments. The funds' emphasis on dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and underperform the market. Also, a company may reduce or eliminate its dividend after the Fund's purchase of such a company's securities. Returns on investments in foreign securities could be more volatile than, or trail the returns on, investments in U.S. securities. Exposures to foreign securities entail special risks, including political, diplomatic, economic, foreign market and trading risks. In addition, unless perfectly hedged, the Fund’s investments in securities denominated in other currencies could decline due to changes in local currency relative to the value of the U.S. dollar, which may affect the Fund’s returns. The funds' hedging strategies may not be successful, and even if they are successful, the funds' exposure to foreign currency fluctuations is not expected to be fully hedged at all times. See the prospectus for specific risks regarding the Fund.
The securities of small capitalization companies are often more volatile and less liquid than the stocks of larger companies and may be more affected than other types of securities during market downturns. Compared to larger companies, small capitalization companies may have a shorter history of operations, and may have limited product lines, markets or financial resources.
Past performance does not guarantee future results. Shares are bought and sold at market price (not NAV), are not individually redeemable, and owners of the Shares may acquire those Shares from the Funds and tender those shares for redemption to the Funds in Creation Unit aggregations only, consisting of 50,000 Shares. Brokerage commissions will reduce returns.
O’Shares Investments℠ funds are distributed by Foreside Fund Services, LLC. Foreside Fund Services, LLC is not affiliated with O’Shares Investments℠ or any of its affiliates.