North Shore, Exchange Traded Concepts partner on ETF targeting dual-class stocks

Aug 14th, 2020 | By | Category: Equities

Indexing boutique North Shore Indices has partnered with white-label ETF provider Exchange Traded Concepts to launch an ETF providing exposure to US equities with dual share class structures.

Tim Rotolo, Founder of North Shore Indices
Tim Rotolo, Founder of North Shore Indices.

The North Shore Dual Share Class ETF (DUAL US) has listed on NYSE Arca and comes with an expense ratio of 0.85%.

Dual share class companies have at least two types of shares – one that is issued to the general public with limited or no voting rights and one for the company’s founders and executives which possess the ability to set corporate policy.

According to North Shore Indices, the strategy benefits from a focus on firms that are better able to pursue their long-term goals without having to navigate external pressure from short-term-driven shareholders.

Tim Rotolo, Founder of North Shore Indices, said, “Visionary founders of young, innovative companies may utilize the dual-class structure so as to gain access to the public markets without giving up control of their companies.

“The dual-class structure may reduce the pressure on company founders and management exerted by outside shareholders that may have short-term objectives such as profits or share price maximization.

“While dual-class companies may represent attractive investment opportunities, investors lack pure-play investment vehicles to gain exposure to these companies.”

The fund is linked to the North Shore Dual Share Class Index which was developed in collaboration with Panos N. Patatoukas, Associate Professor and the L.H. Penney Chair in Accounting at U.C. Berkeley, Haas School of Business.

The index selects its constituents from a universe of the 3,000 largest stocks of companies incorporated in the US with market capitalizations greater than $100 million.

To be eligible, a company must be between six months and 20 years old, relative to its IPO date. According to Patatoukas, the emphasis on younger companies aims to maximize the potential return benefits attributable to the dual-class strategy.

Constituents are weighted by market capitalization, subject to a 20% cap per sector and a 4% cap per security. Index reconstitution and rebalancing occur annually in June.

The fund is the second ETF launched by Exchange Traded Concepts and North Shore Indices. The North Shore Global Uranium Mining ETF (URNM US), which houses $10m AUM and also comes with an expense ratio of 0.85%, provides exposure to the global uranium mining sector.

Garrett Stevens, CEO of Exchange Traded Concepts, commented, “We are proud to expand our relationship with North Shore by offering a second ETF with the firm. We believe that DUAL offers investors exposure to a non-traditional source of alpha that is not readily available in other investment products.”

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