Eddy Elfenbein, editor of the popular “Crossing Wall Street” blog, has a new
actively managed exchange-traded fund, and it does something unique.
The AdvisorShares Focused Equity ETF (NYSE: CWS), which is managed by Elfenbein, is a departure from the usual actively managed
fund — ETF or otherwise — in that new ETF's annual fee is designed to, somewhat, move in accordance with the fund's
performance.
Elfenbein's free buy list has topped the S&P 500 in eight of the past nine years, according to Crossing Wall Street.
“The new active ETF currently has a 0.75 percent expense ratio, but the fee can range from 0.65 percent to 0.85 percent,
according to the prospectus. Specifically, the base fee is adjusted at a rate of 0.02 percent for every 0.25 percent to 0.50
percent of outperformance or underperformance, compared to the performance of the benchmark S&P 500 Index, but only up to 2.00
percent of the performance benchmark,” according to ETF Trends.
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Even if CWS consistently charges 0.85 percent per year, or $85 on a $10,000 investment, the new ETF would be significantly less
expensive than the average actively managed mid- or small-cap fund currently on the market, a massive percentage of which regularly
underperform their benchmarks.
Holdings And Weights
CWS currently holds 20 stocks ranging from weights of 3.22 percent to 6.27 percent. The new ETF's holdings include Microsoft
Corporation (NASDAQ: MSFT), Wells Fargo & Co
(NYSE: WFC) and Ford Motor Company (NYSE: F).
In addition to not having a static fee, CWS aims to be a departure from traditional active funds, which often have high
portfolio turnover that can drive up investor costs.
The Strategy
“The CWS strategy is focused on the long term. That’s why CWS aims to trade its positions as infrequently as possible. The
fund’s goal is to hold a stock for as long as it can. CWS believes that a disciplined buy-and-hold strategy is ideal for riding out
market storms,” according to AdvisorShares.
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