In this column, we typically discuss exchange-traded funds (ETFs). However, today, we'll introduce two, long-only mutual funds issued by Guinness Atkinson that will become ETFs on Mar. 26.
The asset manager informed shareholders of the upcoming conversion, saying:
"The Asia Pacific Dividend Builder Fund and the Dividend Builder Fund are being converted from traditional open-end mutual funds into Exchange Traded Mutual Funds. The Conversions are expected to occur Friday, Mar. 26, 2021, after the close of the NYSE. On Monday, Mar. 29, 2021, these two funds will begin operation as ETFs and will begin trading on the NYSE. The conversion is share for share: you will hold the same numbers of shares in the ETF as you own in the existing Guinness Atkinson Funds."
Converting mutual funds into ETFs is a new trend on Wall Street that might gather pace in the coming quarters. In general, there are similarities and differences between ETFs and mutual funds.
According to Vanguard, ETFs might be more appropriate for investors who do not want to commit an initial investment amount, a requirement of mutual funds. Mutual funds are typically bought directly from the issuer whereas ETFs are traded on stock exchanges. Therefore, it is possible to trade ETFs during the trading day, similar to a stock. The price of a mutual fund is calculated at the end of each trading day.
There are also potential differences in expense ratios. And because of the relative ease of trading in ETFs, market participants might end up incurring additional brokerage costs if they frequently trade in ETFs.
Those investors who are not clear about the suitability of ETFs or mutual funds for their portfolios might consider talking with a financial planner.
With that information, here are the two mutual funds that will become ETFs soon.
1. Guinness Atkinson Dividend Builder Fund
Current Price: $23.15
52-Week Range: $14.35 - $23.20
Dividend Yield: 1.88%
Net Expense Ratio: 0.68%
The Guinness Atkinson Dividend Builder Fund (GAINX) invests in global companies with consistent dividend growth that exceeds the inflation rate. Fund managers also base their selection criteria on factors such as valuation, quality of earnings, balance sheet strength and price momentum.
The fund started trading in March 2012, and its size is about $25.2 million. The actively-managed fund currently has 36 holdings. Its benchmark index is the MSCI World Index. The minimum investment in the mutual fund has so far been $10,000. However, once it becomes an ETF, this limit will no longer apply.
In terms of sectors, Consumer Defensives tops the list with 26.98%. Next in line are Industrials (22.30%), Healthcare (16.44%), Financial Services (14.33%) and Technology (11.49%).
Over half of the businesses come from the U.S., followed by the UK (16.10%), Switzerland (7.95%), Germany (5.57%), France (5.44%) and China (3.31%). The top 10 names comprise around 30% of the fund.
Taiwan Semiconductor Manufacturing (NYSE:TSM); Microsoft (NASDAQ:MSFT); ANTA Sports Products (OTC:ANPDY), which focuses on the sportswear market in China; French food and beverage group Danone (OTC:DANOY); and Johnson & Johnson (NYSE:JNJ) are among the leading stocks in GAINX.
The fund has returned more than 26% in the past year and hit a record high in January. However, recently it has given up some of the gains and is up only 1% for 2021.
After the conversion on Mar. 26, the fund will be named the Smart ETFs Dividend Builder ETF. It will trade on NYSE under the ticker symbol DIVS. Passive-income seekers might want to keep it on their radar.
2. Guinness Atkinson Asia Pacific Dividend Builder Fund
Current Price: $18.04
52-Week Range: $11.71 - $18.56
Dividend Yield: 1.97%
Net Expense Ratio: 1.10%
The second mutual fund that will soon become an ETF also has a dividend focus. Unlike GAINX, however, the Guinness Atkinson Asia Pacific Dividend Builder Fund (GAADX) invests in dividend-paying companies in the Asia Pacific region.
The fund started trading in March 2006, and its size is about $4.4 million. Its benchmark index is the MSCI AC Pacific ex-Japan. GAADX currently has 39 holdings. The minimum investment in the mutual fund has so far been $5,000. However, like GAINX, once it becomes an ETF, this amount would not apply.
As far as sectors are concerned, Financial Services heads the list with 22.50%. Next come Consumer Cyclicals (22.35%), Technology (19.86%), Real Estate (8.23%) and Healthcare (7.23%).
Over a third of the businesses come from China, followed by Taiwan (21.18%), Australia (8.62%), Singapore (8.20%), South Korea (6.54%) and the United States (5.61%). There are no firms from Japan.
Around 30% of the funds are allocated to the top 10 stocks. Leading names include Taiwan-based Hon Hai Precision Industry (OTC:HNHPF), NetEase (NASDAQ:NTES) and China Merchants Bank (OTC:CIHKY).
Over the past year, GAADX has returned about 26%. The fund hit a multi-year high in February. Those investors looking for dividend-paying businesses within the Asia-Pacific region might want to follow the fund.
After the conversion on Mar. 26, the fund will be named SmartETFs Asia Pacific Dividend Builder ETF. It will be listed on NYSE under the ticker symbol ADIV.