LionShare’s ETF Won’t Take Dividends Lion Down

A new ETF, launched by a former Jane Street quant trader, is roaring into the fight against unwanted dividends.

That product, the LionShares U.S. Equity Total Return ETF (TOT), launched last week. Unlike other entrants in the emerging world of dividend-skipping ETFs, the LionShares ETF gives investors exposure to the broad US equity market, its founder said. “TOT has the goal of minimizing distributions. That isn’t really commonplace. We’ve seen the opposite, where funds are trying to maximize distributions,” LionShares CEO Sofia Massie said about income-focused funds. “This type of product was missing from the market.”

No Paws in Trading

Rather than holding individual stocks and selling them just ahead of their dividend dates, the LionShares ETF invests in other ETFs “in a manner intended to minimize the fund’s need to make distributions,” according to the prospectus. That also makes operations simpler and helps keep expenses low with the actively managed ETF charging 7 basis points after an 18 basis-point fee waiver. Using a small number of ETFs as holdings, the fund will have exposure to 1,500 to 2,000 publicly traded companies, Massie said. Avoiding dividends keeps the ETF invested, rather than having to reinvest dividends, and maintains the tax benefits of the ETF structure.

“This product is competing with other broad market ETFs, so the management fee is going to be important for those cost-sensitive investors,” Massie said.

Other niche products in the dividend-avoiding ETF market include: 

• The Roundhill S&P 500 No Dividend Target ETF (XDIV), which launched in July.
• F/m’s Compoundr High Yield Bond (CPHY) and Compoundr U.S. Aggregate Bond (CPAG) ETFs, which debuted last month.

The new ETF is designed to be a core holding for long-term investors, Massie said. “This is meant to [have] a very broad appeal, very efficient, something you’re going to hold in your portfolio year after year.”