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This Dividend-Focused Fund Is Thriving Amid Rising Rates
At times, ETF issuers that read our daily piece will bring things to our attention that may have initially escaped our gaze, especially when markets are actively trading around events such as yesterday’s FOMC rate decision and the resulting rally in global equities.
Today’s topic, DIVY (RealityShares DIVS ETF, Expense Ratio 0.85%, $49.7 million in AUM), has been covered in this column on several occasions in the past (most recently last December), and we note that the fund has seen decent inflows year-to-date given its asset size (over $12 million in via creation activity).
The fund, which isolates dividend growth, will celebrate its third birthday since trading live later this year in December, and as we have mentioned in the past, some ETF investors and portfolio managers like to see a Morningstar 3 to 5 year “Star” ranking on a fund before making a move. Nonetheless, DIVY has been gaining traction even before this three year live anniversary has taken place.
Issuer RealityShares believes that this is a function of the current interest rate environment as portfolio managers and advisors alike have been looking for “fixed income diversifiers” like DIVY, in that the product does not have interest rate risk, a negative correlation to the Barclays Capital U.S. Aggregate Bond Index, and a near-zero correlation to the SPX.
The combo of low volatility and low correlation seems to be resonating (and the fund’s recent performance, up more than 4.7% YTD versus AGG (-0.31%) certainly doesn’t hurt) with investors — at least evidenced by the fund’s year-to-date inflows. Back in December when we covered the fund, we noted that it was trading at a new all-time high at the moment, and the fund continued to surge into March with additional new all-time highs until losing some steam over the past couple weeks or so.
Fund literature states that “DIVY is designed to perform throughout virtually any market environment. Because it was designed to have a lower volatility than the S&P 500 while exhibiting higher returns than bonds, DIVY serves as a potentially effective replacement for part of your bond portfolio allocation.” Our key takeaway in the short term is that DIVY has notably surged versus the Barclays AGG since the FOMC started to raise interest rates beginning last December, and of course yesterday the FOMC raised rates once again.
The Reality Shares DIVS ETF (NYSE:DIVY) was trading at $26.41 per share on Thursday afternoon, down $0.06 (-0.23%). Year-to-date, DIVY has gained 4.64%, versus a 6.77% rise in the benchmark S&P 500 index during the same period.
DIVY currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #57 of 107 ETFs in the Large Cap Blend ETFs category.
Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.
Paul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.
He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.
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