By John Spence
A DOW JONES COLUMN
An exchange-traded fund launching Friday that plans to invest in
smartphone companies is the latest gimmick in the $1 trillion ETF
business.
"The index includes companies primarily involved in the
building, design, and distribution of the handsets, hardware,
software and mobile networks associated with the development, sale,
and usage of smartphones," says First Trust Portfolios LP in a fact
sheet on the fund.
The ETF lists on the Nasdaq Stock Market on Friday under the
ticker symbol "FONE." It recently traded at $30.25, down 5 cents,
or 0.2%.
"First Trust is extremely pleased to launch another pioneering
exchange-traded fund," said Robert Carey, chief investment officer
at First Trust, in a press release. "We continually evaluate
opportunities to broaden the First Trust family of ETFs, and FONE
will enhance our unique specialty sector offerings."
A First Trust spokeswoman didn't immediately return a call
Friday morning seeking additional comment on the launch of the
smartphone ETF.
The Wheaton, Ill., money manager oversees more than $6 billion
in ETF assets and has been in the business since 2005.
The new fund will have an expense ratio of 0.7% of assets. The
tracking index classifies a smartphone as a "wireless, mobile
communication device offering advanced capabilities and
functionalities, including web access, through the use of an
identifiable operating system," according to the fact sheet.
The company lists Compal Communications Inc. (8078.TW),
Motorola, Samsung Electronics Co. (SSNHY, 005930.SE), LG
Electronics Inc. (066570.SE) and HTC Corp. (2498.TW, HTCXF) as its
top holdings. (It wasn't immediately clear if the fund holds both
companies that Motorola split into, Motorola Mobility and Motorola
Solutions, and the firm wasn't available to clarify.)
The benchmark holds 74 stocks in all.
Although the ETF business has been growing rapidly in recent
years, not every fund is a success, and many ETFs have been shut
down for lack of interest. In 2010, there were 173 new ETFs
launched and 49 delisted. There were 46 delisted in 2009, according
to research from BlackRock Inc. (BLK).
Hundreds of exchange-traded products have less than $100 million
in assets, and the industry has faced criticism for introducing
highly specialized funds and portfolios targeting trendy
sectors.
(John Spence is a writer for MarketWatch. He can be reached at
415-439-6400 or via email at AskNewswires@dowjones.com.)