(Bloomberg) -- Playing the trade war usually means betting against companies that are likely to suffer, such as those in the tech sector or with Chinese revenue.
Not so for a new exchange-traded fund from M-CAM International that's trying to identify the winners with an approach that could surprise some investors. The Innovation Alpha Trade War ETF, which started trading on Wednesday under the ticker TWAR, plans to buy companies that have government contracts, calculating that state support could buoy these stocks if tensions escalate. Only firms with strong intellectual property -- as defined by M-CAM -- are eligible for the fund.
“There are going to be companies where their technology is, in many respects, insulated from the effect of a trade war by virtue of historical relationships or government patronage,” David Martin, M-CAM's chief executive officer and chairman, said by phone. “The market should have visibility” of these stocks, he said.
The ETF's index includes International Business Machines Corp. and Cisco Systems Inc., and multinational companies from countries such as Germany, Brazil, China and Mexico. The strategy leans away from small-cap companies, which are often seen as more insulated from trade-war woes.
The fund's more expensive that some other ways to express trade tensions. TWAR will charge a management fee of 0.81% per year, or $8.10 for every $1,000 invested in the product. That's more than four time what the iShares Russell 2000 ETF of small-cap stocks costs, and higher than the fee for either China- or tech-focused funds.
To contact the reporter on this story: Elena Popina in New York at epopina@bloomberg.net
To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, ;Jeremy Herron at jherron8@bloomberg.net, Rachel Evans, Andrew Dunn
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