Columbia Management is planning to further expand into the actively managed ETF space with 17 new ETFs, which were described in registration statements filed with the SEC last week.
Twelve of the ETFs listed in the registration statements will be ETF versions of mutual funds that the firm currently offers, according to a spokesman. “An investor who wants that strategy, but in an ETF format, will be able to access that,” the spokesman said.
The other five ETFs are short-term muni bond lattering ETFs maturing in 2015, 2016, 2017, 2018 or 2019. “A lot of investors might try this themselves,” the spokesman said. ”We think this [offering] could be more efficient and cost effective.”
Columbia selected this particular set of investments and investment strategies because “if someone wanted to put together an asset allocation portfolio using active ETFs, we think they’re fully covered” with this selection of ETFs, the spokesman said.
The firm, which offers 140 mutual funds, currently offers five actively managed ETFs, which the firm acquired with Grail Advisors last year.
The proposed new funds are:
Columbia Emerging Markets Bond ETF
Columbia European Equity ETF
Columbia International Equity ETF
Columbia Limited Duration Credit ETF
Columbia Short Term Bond ETF
Columbia Small/Mid Cap Value ETF
Columbia U.S. Government Mortgage ETF
Columbia Dividend Income ETF
Columbia Emerging Markets Equity ETF
Columbia Pacific/Asia Equity ETF
Columbia Small/Mid Cap Growth ETF
Columbia Tax-Exempt ETF
Columbia AMT-Free Muni Target 2015 ETF
Columbia AMT-Free Muni Target 2016 ETF
Columbia AMT-Free Muni Target 2017 ETF
Columbia AMT-Free Muni Target 2018 ETF
Columbia AMT-Free Muni Target 2019 ETF
Following is some detail on the investment strategy of the ETFs, which was included in the registration statements.
Columbia European Equity ETF: The Fund primarily invests in equity securities of European companies that are believed to offer growth potential. Under normal market conditions, the Fund will invest at least 80% of its net assets (including the amount of any borrowings for investment purposes) in equity securities of European companies. These equity securities generally include common stocks, preferred stocks, securities convertible into U.S. common stocks, U.S. dollar-denominated American Depositary Receipts (ADRs), and U.S. dollar-denominated foreign stocks traded on U.S. exchanges. A company is considered to be located in Europe if:
• It is organized under the laws of a European country or has a principal office in a European country;
• It derives at least 50% of its total revenues from businesses in Europe; or
• Its equity securities are traded principally on a stock exchange in Europe.
Although the Fund emphasizes investments in developed countries, the Fund also may invest in securities of companies located in developing or emerging markets.
Columbia Limited Duration Credit ETF: Under normal market conditions, the Fund invests at least 80% of its net assets (including the amount of any borrowings for investment purposes) in corporate bonds. The Fund will primarily invest in debt securities with short- and intermediate-term maturities. The Fund may invest up to 15% of its net assets in securities rated below investment grade (i.e., junk bonds). Up to 25% of the Fund’s net assets may be invested in foreign investments, including emerging markets.
Columbia Short Term Bond ETF: Under normal circumstances, the Fund invests at least 80% of its net assets (including the amount of any borrowings for investment purposes) in bonds, including debt securities issued by the U.S. Government and its agencies and instrumentalities, debt securities issued by corporations, mortgage- and other asset-backed securities, and dollar-denominated securities issued by foreign governments, companies, private issuers or other entities. The Fund also invests at least 65% of its total assets in securities that, at the time of purchase, are rated investment grade or are unrated but determined by Columbia Management Investment Advisers, LLC, the Fund’s investment manager (the Investment Manager), to be of comparable quality. Under normal circumstances, the Fund’s dollar-weighted average effective maturity will be three years or less, and its duration will be three years or less.
The Fund may invest in derivatives, including futures, forwards, options, swap contracts and other derivative instruments for, among other reasons, investment purposes, for risk management (hedging) purposes, or to increase investment flexibility. The Fund also may invest in private placements. In addition, the Fund may participate in mortgage dollar rolls up to the Fund’s then current position in mortgage-backed securities.
Columbia Small/Mid Cap Value ETF. Under normal circumstances, the Fund invests at least 80% of its net assets (including the amount of any borrowings for investment purposes) in equity securities of companies that have market capitalizations in the range of the companies in the Russell 2500 Value Index at the time of purchase. Columbia Management Investment Advisers, LLC (the Investment Manager) seeks to identify companies that it believes are undervalued and have the potential for long-term growth. The Fund may invest up to 20% of its total assets in foreign securities or American Depositary Receipts. The Fund normally invests in common stocks and also may invest in real estate investment trusts and in securities of other companies (wherever organized) principally engaged in the real estate industry.
Columbia U.S. Government Mortgage ETF: The Fund’s assets primarily are invested in mortgage-related securities. Under normal market conditions, at least 80% of the Fund’s net assets (including the amount of any borrowings for investment purposes) are invested in mortgage-related securities that either are issued or guaranteed as to principal and interest by the U.S. Government, its agencies, authorities or instrumentalities. This includes, but is not limited to, Government National Mortgage Association (GNMA or Ginnie Mae) mortgage-backed bonds, which are backed by the full faith and credit of the U.S. Government; and Federal National Mortgage Association (FNMA or Fannie Mae) and Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) mortgage-backed bonds. FNMA and FHLMC are chartered or sponsored by Acts of Congress; however, their securities are neither issued nor guaranteed by the United States Treasury. The Fund may invest in fixed income securities of any maturity and does not seek to maintain a particular dollar-weighted average maturity.
Columbia Management Investment Advisers, LLC (the Investment Manager) may use derivatives such as forward contracts, including those on mortgage-backed securities in the “to be announced” (TBA) market, in an effort to produce incremental earnings, to hedge existing positions, to increase market exposure and investment flexibility, or to obtain or reduce credit exposure.
Columbia AMT-Free Muni Target 2015 ETF
Columbia AMT-Free Muni Target 2016 ETF
Columbia AMT-Free Muni Target 2017 ETF
Columbia AMT-Free Muni Target 2018 ETF
Columbia AMT-Free Muni Target 2019 ETF
Under normal circumstances, the Fund will invest at least 80% of its net assets in bonds and other fixed-income securities that pay interest exempt from federal income tax (including the federal alternative minimum tax). These securities are issued by states and their political subdivisions, agencies, authorities and instrumentalities and by other qualified issuers. The Fund may invest up to 20% of its total net assets in securities the interest on which is subject to federal income tax, including the federal alternative minimum tax.
The Fund will generally invest in securities that, at the time of purchase, are investment grade or are unrated but determined by Columbia Management Investment Advisers, LLC (the Investment Manager), the Fund’s investment adviser, to be of comparable quality. The Fund may invest in fixed or variable-rate debt securities, including zero-coupon bonds.
The Fund will invest principally in fixed-income securities that mature between June 1 and August 31 of the year referenced in its name. As securities mature, proceeds will typically be re-invested into tax-exempt cash equivalents directly or through tax-exempt funds. The Fund will wind up and terminate on or about [August 31st] of the year referenced in its name. Upon its termination, the Fund will distribute substantially all of its net assets, after making appropriate provision for any liabilities of the Fund, to the then-current shareholders.
Columbia Dividend Income ETF: Under normal circumstances, the Fund invests at least 80% of its net assets in a diversified portfolio of income-producing (dividend-paying) equity securities, which will consist primarily of common stocks but also may include preferred stocks and convertible securities. The Fund invests principally in securities of companies that Columbia Management Investment Advisers, LLC, the Fund’s investment adviser (the Investment Manager), believes are undervalued but also may invest in securities of companies that the Investment Manager believes have the potential for long-term growth. The Fund may invest in companies that have market capitalizations of any size.
The Fund may invest up to 20% of its net assets in debt securities, including securities that, at the time of purchase, are rated low and below investment grade or are unrated but determined by the Investment Manager to be of comparable quality, which are commonly referred to as “junk bonds.”
The Fund may also invest up to 20% of its net assets in foreign securities. The Fund may invest directly in foreign securities or indirectly through depositary receipts. Depositary receipts are receipts issued by a bank or trust company and evidence ownership of underlying securities issued by foreign companies.
Columbia Emerging Markets Equity ETF: Under normal circumstances, the Fund invests at least 80% of its net assets in equity securities of companies located in emerging market countries. Emerging market countries include those countries whose economies are considered to be developing or emerging from underdevelopment. The Fund may invest in a variety of countries, industries and sectors and does not attempt to invest a specific percentage of its assets in any given country, industry or sector. The Fund may invest in companies that have market capitalizations of any size. The Fund may invest directly in foreign securities or indirectly through closed-end investment companies and depositary receipts.
The Fund may invest in currency forwards for hedging purposes and futures for both hedging and non-hedging purposes, including, for example, to seek to enhance returns or, in certain unusual circumstances, when holding a derivative is deemed preferable to holding the underlying asset.
The Fund may invest in special situations such as companies involved in initial public offerings, tender offers, mergers and other corporate restructurings, and in companies involved in management changes or companies developing new technologies.
Columbia Pacific/Asia Equity ETF: Under normal circumstances, the Fund invests at least 80% of its net assets in equity securities (including, but not limited to, common stocks, preferred stocks and securities convertible into common or preferred stocks) of companies located in Asia and the Pacific Basin. The Fund may invest in a variety of countries, industries and sectors and does not attempt to invest a specific percentage of its assets in any given country, industry or sector. The Fund may invest in companies that have market capitalizations of any size. The Fund may invest directly in foreign securities or indirectly through closed-end investment companies and depositary receipts.
The Fund may invest in currency forwards for hedging purposes and futures for both hedging and non-hedging purposes, including, for example, to seek to enhance returns or, in certain unusual circumstances, when holding a derivative is deemed preferable to holding the underlying asset.
The Fund may invest in special situations such as companies involved in initial public offerings, tender offers, mergers and other corporate restructurings, and in companies involved in management changes or companies developing new technologies.
Columbia Small/Mid Cap Growth ETF: Under normal circumstances, the Fund invests at least 80% of its net assets in equity securities (including, but not limited to, common stocks, preferred stocks and securities convertible into common or preferred stocks) of companies that have market capitalizations in the range of companies in the Russell 2500 Growth Index at the time of purchase. The Fund invests primarily in common stocks of companies that the Investment Manager believes have the potential for long-term, above-average earnings growth. The Fund may also invest up to 20% of its net assets in stocks of companies that have market capitalizations outside the range of the Russell 2500 Growth Index.
The Fund may also invest up to 20% of its total assets in foreign securities. The Fund may invest directly in foreign securities or indirectly through depositary receipts. Depositary receipts are receipts issued by a bank or trust company and evidence ownership of underlying securities issued by foreign companies. The Fund may invest in special situations such as companies involved in initial public offerings, tender offers, mergers and other corporate restructurings, and in companies involved in management changes or developing new technologies.
The Fund’s investment strategy may involve the frequent trading of portfolio securities. This may cause the Fund to incur higher transaction costs (which may adversely affect the Fund’s performance) and may increase taxable distributions for shareholders.
Columbia Tax-Exempt ETF: Under normal circumstances, the Fund invests at least 80% of its total net assets in bonds that pay interest exempt from federal income tax (including the federal alternative minimum tax). These securities are issued by states and their political subdivisions, agencies, authorities and instrumentalities and by other qualified issuers. The Fund may invest up to 20% of its total net assets in securities the interest on which is subject to federal income tax. The Fund may invest in fixed or variable-rate debt securities, including zero-coupon bonds, and the Fund may invest in bonds of any maturity.
Under normal circumstances, the Fund invests at least 65% of its total assets in tax-exempt bonds that, at the time of purchase, are rated investment grade or are unrated but determined by Columbia Management Investment Advisers, LLC, the Fund’s investment adviser (the Investment Manager), to be of comparable quality. The Fund may invest up to 35% of its total assets in bonds (not including pre-refunded bonds) that, at the time of purchase, are rated below investment grade or are unrated but determined by the Investment Manager to be of comparable quality, which are commonly referred to as “junk bonds.” The Fund will invest no more than 25% of its total assets in bonds that, at the time of purchase, are unrated but determined by the Investment Manager to be of comparable quality to below investment grade bonds.
The Fund may invest in derivatives, including futures, forwards, options, swap contracts, inverse floaters and other derivative instruments. The Fund may invest in derivatives for both hedging and non-hedging purposes, including, for example, to seek to enhance returns or as a substitute for a position in an underlying asset.
