An Experienced Hand Launches 3 ETFs Under His Own Flag

While Kelly ETFs is a new issuer in the ETF space, founder Kevin Kelly has a long history in the industry. He has been an issuer as founder of Recon Capital, which was acquired by Horizons ETF Management in 2017, and an index provider as CEO of Kelly Benchmarks, an index provider and sponsor of two Pacer-issued REIT-focused ETFs. In aggregate, those funds focused on real estate investment trusts (REITs) now total $1.4 billion in assets under management, and like the funds recently launched under the new issuer focus on specific segments of the overall REIT marketplace. The previously launched funds include the Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF and the Pacer Benchmark Industrial Real Estate SCTR ETF . Both funds carry a 60-basis-point total expense ratio, meaning that shareholders with $1,000 invested would expect to see fees of $6 over a calendar year. Kelly ETFs launched three new funds on Jan. 12. Two of them follow the trends established by the Pacer issued products and the third follows a trend that has been emerging for a while. XDNA The 78-basis-point Kelly CRISPR & Gene Editing Technology ETF tracks the Strategic CRISPR & Gene Editing Technology Index. The fund website points investors to the Kelly Intelligence website. This seems to be under construction, but I was able to get some index information from the summary prospectus. The fund is looking for holdings with at least $300 million market capitalization and $1 million of shares traded daily. In reviewing the holdings of the fund, it looks like the issuer is looking to target mid- to large-capitalization companies, as evidenced by the average weighted market cap of $53 billion. The portfolio has 23 equity holdings, and in reviewing the companies there is good exposure to what the fund is promising, namely CRISPR and gene editing technology with names such as Beam Therapeutics , CRISPR Therapeutics and Intella Therapeutics ; those three combine to account for about 29% of the fund's total weight. About 33% of the funds weight is in what I would call more traditional pharmaceutical names, such as AbbVie , Bristol-Myers Squibb and Thermo Fisher Scientific along with seven other names. Overall, the fund seems to deliver on its promise of providing exposure to this emerging area of biotechnology. As usual, I would have liked to see a portfolio with all names more concentrated on the indicated theme, but pure play companies in this area aren't as plentiful as they might be in the future, so for now we'll have to do with these exposures. HOTL The 78-basis-point Kelly Hotel & Lodging Sector ETF tracks the Strategic Hotel & Lodging Sector Index. More detailed info can be found in the summary prospectus, but similar to XDNA the fund is looking for holdings with at least $300 million market capitalization and $1 million of shares traded daily. Holdings for this ETF do a great job providing exposure to hotel and resort owner/operators, not just in the United States but globally with listings from the UK, Japan, Sweden, Spain, Singapore, France, Hong Kong, Israel and Italy. Average weighted market capitalization sits at roughly $23.5 billion. If I take out the top three market cap names of Airbnb , Marriot International and Hilton Worldwide , that weighted average figure drops to $8.4 billion. In case you are wondering, Airbnb's market capitalization is about $8 billion larger than the combined capitalizations of Marriott and Hilton. Not bad for a hotel company that doesn't own any hotels. Overall, I don't have any concerns about this fund or its ability to provide the exposure it is offering. While we have some time before this pandemic morphs into an endemic situation and we return to normal, stepping into a position in this fund wouldn't be the worst thing, especially if you are forecasting a quick rebound in business and leisure travel once things normalize. RESI The 68-basis-point Kelly Residential & Apartment Real Estate ETF tracks the Strategic Residential & Apartment Real Estate Sector Index. This fund is also looking for holdings with at least $300 million market capitalization and $1 million of shares traded daily per the summary prospectus. Similar to HOTL, this fund does a great job providing the exposures as advertised. Unlike HOTL, it does limit geographic exposure to the US and Canada. Based on work I have done for clients of mine I can attest that the bulk of these names are located here in North America and the expected returns to the portfolio in holding these few names doesn't justify the overall cost to both fund shareholders as well as the issuer. If you are wondering why this fund is 10 basis point lower than the other products, my bet is that it's because of the limited geographical reach. The fund's portfolio sports a weighted average market capitalization of just over $16 billion with holdings ranging from $623 million to $33.8 billion. The fund focuses on single-family rental homes, apartment buildings, student housing and manufactured homes. From what I read the fund does not invest in senior living facilities/communities; at least it doesn't mention these property types specifically. To my knowledge, this is the first fund to offer this specific type of real estate exposure. Given the trend of institutional acquisition of residential properties, this might be a space to keep an eye on going forward. Still, if Zillow's residential real estate experiment in 2021 taught us anything, it's that this corner of the real estate market can be tough to navigate at scale. Closing the Deal In addition to having some strong ticker game, Kelly ETFs does a pretty good job with these funds overall. As I mentioned at the outset, founder Kevin Kelly has had some ETF success in the past with others and it looks like he is taking a good first step on his own with these funds. Also, stay tuned to see if his filing for an Ether futures-based fund ever gets approved.

An Experienced Hand Launches 3 ETFs Under His Own Flag

ETF veteran Kevin Kelly is the force behind Kelly ETFs, which this month introduced three funds with distinctly different focuses.

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