IndexIQ Launches R&D-Focused ETF Trio

New York Life’s ETF brand is targeting companies that spend big on research.

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Reviewed by: Dan Mika
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Edited by: Dan Mika

IndexIQ’s latest set of ETFs will aim to hold companies across U.S. and global companies that spend the most on research and development efforts.

The IQ U.S. Mid Cap R&D Leaders ETF (MRND), the IQ U.S. Large Cap R&D Leaders ETF (LRND) and the IQ Global Equity R&D Leaders ETF (WRND) all debuted on the NYSE Arca Tuesday with expense ratios of 0.16%, 0.14% and 0.18%, respectively.

All three funds carry a fee waiver of 1 basis point until the end of August this year.

The funds follow custom indexes produced by IndexIQ that respectively hold the 100 companies in the Russell Mid-Cap Index and Russell 1000 with the largest dollar amounts of spending in research and development in the past 12 months, along with the top 200 companies in the MSCI All-World Index based on that metric.

The funds weight their holdings based on the size of their spending, and their indexes rebalance and reconstitute quarterly.

A handful of ETFs already use research and development spending as a primary factor in stock selection. The index underlying the Direxion Moonshot Innovators ETF (MOON) considers a company’s research spending to revenue ratio when reconstituting, while the Donoghue Forlines Risk Managed Innovation ETF (DFNV) considers that ratio along with profits generated from research spending.

However, those two ETFs are at least 50 basis points more expensive than the IndexIQ products, and don’t rely on research spending as their primary selection factor.

All three new funds expect to primarily hold companies in the information technology, health care and consumer discretionary sectors.

WRND and LRND’s top holdings include Amazon, Alphabet, Apple, Microsoft, Meta Platforms and Merck, with those stocks holding 34.78% and 20.27% of the fund’s weights, respectively. MRND’s top five holdings include Incyte, Hewlett-Packard Enterprise, Western Digital, HP and Corteva, with those stocks holding just over 13% of the fund’s weight.

 

(Use our stock finder tool to find an ETF’s allocation to a certain stock.)

 

Contact Dan Mika at [email protected], and follow him on Twitter

Dan Mika is a reporter for etf.com. He has previously covered business for the Ames Tribune and Cedar Rapids Gazette in Iowa, and BizWest Media in Fort Collins, Colorado. Dan holds a bachelor's degree in journalism from Truman State University.