Reality Shares, begun trading of 2 new ETFs, the Reality Shares DIVCON Dividend Defender ETF (BATS: DFND) and the Reality Shares DIVCON Dividend Guard ETF (BATS: GARD), on Thursday, January 14, 2015. Here is a synopsis of the new ETFs:
1.
FUND INFORMATION:
| Symbol: DFND | Exchange: BATS |
| Name: Reality Shares DIVCON Dividend Defender ETF | Net Expense Ratio: 0.95% |
FUND OBJECTIVE:
The Reality Shares DIVCON Dividend Defender ETF seeks long-term capital appreciation by tracking the performance, before fees and expenses, of the Reality Shares DIVCON Dividend Defender Index.
REFERENCE INDEX:
The Reality Shares DIVCON Dividend Defender Index is designed to capitalize on the theory that, over time, companies that consistently grow their dividends tend to have investment returns above the over all market and companies that cut their dividends tend to have investment returns below the overall market. The Benchmark Index is designed to select the companies for a long position that have the highest probability of increasing their dividend in a 12-month period and select the companies for a short position that have the highest probability of decreasing their dividend in a 12-month period. These probabilities are determined by Reality Shares’ DIVCON Scoring system, which is a proprietary, rules-based scoring and weighting methodology, and are expressed as a DIVCON Score and DIVCON Rating for each company.
The DIVCON Scoring system begins by identifying the 500 largest U.S. companies based on market capitalization as of the Benchmark Index reconstitution date and then narrows this universe to those companies that paid an ordinary dividend and announced a future dividend payment during the 12 months preceding such date. The DIVCON Scoring system analyzes quantitative factors that Reality Shares has determined to be correlated to a company’s likelihood to increase or decrease future dividends, and weights each factor based on its effectiveness in predicting dividend changes to produce a company’s DIVCON Score. After a DIVCON Score is calculated for each company, it is assigned a rating from 1 to 5 according to the DIVCON Rating system: DIVCON 1, DIVCON 2, DIVCON 3, DIVCON 4 and DIVCON 5.
Companies in the DIVCON 1 category are those determined most likely to decrease their dividend in the next twelve months. Companies in the DIVCON 5 category are those determined most likely to increase their dividend in the next twelve months. The Benchmark Index consists of a “Long Portfolio” and a “Short Portfolio.” The Long Portfolio consists of all DIVCON 5 stocks or the 30 stocks with the highest DIVCON Scores, whichever is greater. All stocks in the Long Portfolio are reflected as long positions in such stocks. The value of the Long Portfolio reflected in the Benchmark Index is expected to increase if the prices of stocks included in the Long Portfolio increase.
The Short Portfolio consists of all DIVCON 1 stocks or the 10 stocks with the lowest DIVCON Scores, whichever is greater. All stocks in the Short Portfolio are reflected as short positions in such stocks. The value of the Short Portfolio reflected in the Benchmark Index is expected to increase if the prices of stocks included in the Short Portfolio decrease. Companies are weighted in each Portfolio based on their DIVCON Scores. Companies with higher DIVCON Scores are weighted more heavily in the Long Portfolio, and companies with lower DIVCON Scores are weighted more heavily in the Short Portfolio. The Benchmark Index will direct approximately 75% exposure to the Long Portfolio and approximately 25% exposure to the Short Portfolio. The Benchmark Index is rebalanced at the end of any calendar quarter if the value of the Short Portfolio has increased 10% or more from the last rebalancing date. The Benchmark Index also is rebalanced if the value of either the sum of or difference between the Long Portfolio and Short Portfolio changes in an amount greater than predetermined levels, effect ive the next business day. The Benchmark Index is reconstituted annually on the first Friday in December. As of December 4, 2015, the market capitalizations of the 500 largest U.S. companies included in the DIVCON Scoring System ranged from $7.14 billion to $660.12 billion.
Index Top Holdings (12/31/2015):
| TOP 5 LONG HOLDINGS | |
| McKesson Corp | 2.28% |
| Broadcom Corp | 2.24% |
| Waste Management | 2.22% |
| Estee Lauder Companies | 2.20% |
| Tyson Foods | 2.18% |
| TOP 5 SHORT HOLDINGS | |
| FirstEnergy Corp | -4.33% |
| Newmont Mining Corp | -3.97% |
| Exelon Corp | -2.11% |
| Entergy | -2.07% |
| AGL Resources Inc | -2.06% |
INDEX SECTOR WEIGHT (12/31/2015):
| Consumer Discretionary | 20.73% |
| Industrials | 20.45% |
| Consumer Staples | 8.46% |
| Information Technology | 8.35% |
| Healthcare | 6.47% |
| Financials | 3.97% |
| Energy | -5.24% / +2.13% |
| Materials | -5.83% / +2.01% |
| Telecommunication Services | -1.94% |
| Utilities | -10.68% |
Useful Links:
DFND Home Page
Category: Equities>
2.
FUND INFORMATION:
| Symbol: GARD | Exchange: BATS |
| Name: Reality Shares DIVCON Dividend Guard ETF | Net Expense Ratio: 0.95% |
FUND OBJECTIVE:
The Reality Shares DIVCON Dividend Guard ETF seeks long-term capital appreciation by tracking the performance, before fees and expenses, of the Reality Shares DIVCON Dividend Guard Index.
REFERENCE INDEX:
The Reality Shares DIVCON Dividend Guard Index is designed to capitalize on the theory that, over time, companies that consistently grow their dividends tend to have investment returns above the overall market and companies that cut their dividends tend to have investment returns below the overall market.
The Benchmark Index is designed to select the companies for a long position that have the highest probability of increasing their dividend in a 12-month period and select the companies for a short position that have the highest probability of decreasing their dividend in a 12-month period. These probabilities are determined by Reality Shares’ DIVCON Scoring system, which is a proprietary, rules-based scoring and weighting methodology, and are expressed as a DIVCON Score and DIVCON Rating for each company.
The DIVCON Scoring system begins by identifying the 500 largest U.S. companies based on market capitalization as of the Benchmark Index reconstitution date and then narrows this universe to those companies that paid an ordinary dividend and announced a future dividend payment during the 12 months preceding such date. The DIVCON Scoring system analyzes quantitative factors that Reality Shares has determined to be correlated to a company’s likelihood to increase or decrease future dividends, and weights each factor based on its effectiveness in predicting dividend changes to produce a company’s DIVCON Score. After a DIVCON Score is calculated for each company, it is assigned a rating from 1 to 5 according to the DIVCON Rating system: DIVCON 1, DIVCON 2, DIVCON 3, DIVCON 4 and DIVCON 5.
Companies in the DIVCON 1 category are those determined most likely to decrease their dividend in the next twelve months. Companies in the DIVCON 5 category are those determined most likely to increase their dividend in the next twelve months.
The Benchmark Index uses a proprietary, rules-based methodology to direct its exposure to two possible positions:
(i) 100% exposure to a Long Portfolio or
(ii) 50% exposure to a Long Portfolio and 50% exposure to a Short Portfolio (Long/Short Portfolio).
The Long Portfolio consists of all DIVCON 5 stocks or the 30 stocks with the highest DIVCON Scores, whichever is greater. The Short Portfolio consists of all DIVCON 1 stocks or the 10 stocks with the lowest DIVCON Scores, whichever is greater. Companies are weighted in each Portfolio based on their DIVCON Scores. Companies with higher DIVCON Scores are weighted more heavily in the Long Portfolio, and companies with lower DIVCON Scores are weighted more heavily in the Short Portfolio. Whether the Benchmark Index will consist of the Long Portfolio or Long/Short Portfolio depends on whether its proprietary Guard Indicator is triggered.
The Guard Indicator is a measure of overall market strength, which is determined by calculating the relationship between short-term and long-term trends in both market price and volatility of each of the 10 sectors represented in the Benchmark Index. The Guard Indicator can range from a level of 1-10, representing the number of sectors indicated to be showing strength. When the Guard Indicator is 8 or greater, which indicates that 8 or more sectors are showing strength, then the Benchmark Index will consist of the Long Portfolio. When the Guard Indicator is 7 or less, which indicates that 7 or fewer sectors are showing strength, then the Benchmark Index will consist of the Long/Short Portfolio, effective the next business day. The Benchmark Index will continue to consist of the Long/Short Portfolio until the Guard Indicator returns to a level of 8 or greater, at which point the Benchmark Index again will consist of the Long Portfolio, effective the next business day. The Guard Indicator is measured as of the close of trading on the New York Stock Exchange each day (typically 4:00 p.m. Eastern time).
The following sectors are represented in the Benchmark Index: consumer discretionary, consumer staples, energy, financials, health care, industrials, information technology, materials, telecommunication services, and utilities. The Benchmark Index is rebalanced at the end of any calendar quarter if the value of the Short Portfolio has increased 10% or more from the last rebalancing date. The Benchmark Index also is rebalanced if the value of either the sum of or difference between the Long Portfolio and Short Portfolio changes in an amount greater than predetermined levels, effective the next business day. The Benchmark Index is reconstituted annually on the first Friday in December. As of December 4, 2015, the market capitalizations of the 500 largest U.S. companies included in the DIVCON Scoring System ranged from $7.14 billion to $660.12 billion.
Index Top Holdings (12/31/2015):
| TOP 5 LONG HOLDINGS | |
| McKesson Corp | 1.48% |
| Broadcom Corp | 1.46% |
| Waste Management | 1.44% |
| Estee Lauder Companies | 1.43% |
| Tyson Foods | 1.42% |
| TOP 5 SHORT HOLDINGS | |
| FirstEnergy Corp | -8.45% |
| Newmont Mining Corp | -7.76% |
| Exelon Corp | -4.12% |
| Entergy | -4.05% |
| AGL Resources Inc | -4.02% |
INDEX SECTOR WEIGHT (12/31/2015):
| Consumer Discretionary | 13.49% |
| Industrials | 13.27% |
| Consumer Staples | 5.50% |
| Information Technology | 5.44% |
| Financials | 2.59% |
| Energy | -10.26% / +1.40% |
| Materials | -11.35% / +1.30% |
| Utilities | -20.84% |
| Telecommunication Services | -3.79% |
Useful Links:
GARD Home Page
Category: Equities>