Financial advisory firm Hill Investment Group is leaving nothing to likelihood because it prepares to roll out its first exchange-traded fund.
The $1.1 billion St. Louis-based registered investment advisor, which has filed with the Securities and Exchange Commission to supply the Longview Advantage ETF (EBI), is raising pre-launch seed capital by offering investors a technique to reallocate appreciated investments into the brand new ETF.
The capital raise, which is anticipated to succeed in $500 million by the ETF’s February debut, employs Section 351 of the Internal Revenue Service code. In essence, investors holding securities with a low-cost basis and embedded capital gains can roll the worth of those investments into the brand new ETF without triggering a taxable event.
The in-kind transfer doesn’t remove the embedded capital gains; as an alternative, it defers them to be paid when the investor eventually sells the ETF.
Matt Hall, co-founder and CEO of Hill Investment Group, said the capital raising strategy is being marketed to other advisory firms, particularly those serving several clients within the technology sector who’ve portfolios loaded with stock options that may have a wealth of embedded capital gains.
“We predict the 351 exchange is an excellent helpful technique to help people,” Hall said. “My prediction is you’ll hear more about this strategy as other firms attempt to coordinate with advisory firms.”
The brand new ETF shall be an actively managed strategy benchmarked to the Russell 3000 Index, which Hall described as a mix of passive and energetic.
“We call it passive-aggressive,” he said. “Our fund can have dynamic exposure to the worth factor with a greater tilt to value at times when the worth spread is wider, which shall be the more energetic component.”
The EBI ETF will launch with an expense ratio of 25 basis points, but Hall said that the fee shall be lowered as assets within the fund grow.
The fund shall be managed by Matt Zenz, who formerly oversaw assets at Dimensional Fund Advisors.