Style Box agnostic IPOX Indexes sail past markets in Q3 2017. The style box agnostic IPOX Indexes recorded outsized gains during last quarter, significantly exceeding the performance of the respective markets. In the U.S., e.g., the IPOX 100 U.S. (IPXO) – benchmark for the performance of the largest New Listings (IPOs and Spin-offs) in the U.S. by applying the IPOX Indexes Technology – added 7.06% to 18.00% YTD, now 547 bps. YTD ahead of the S&P 500 (SPX), main gauge for U.S. stocks. Big gains extended across the IPOX Indexes Universe with the IPOX International (IPXI) and IPOX Europe (IXTE) continuing to stand out.
(Perceived) Corporate Actions drive big gains in IPOX portfolio holdings: Being on the winning side of (perceived) corporate actions and activist investor interest globally continued to be an important feature of the IPOX Indexes and contributed significantly to the outsized performance. Select IPOX Holdings subjected to such actions in Q3 2017 included:
|Name||Ticker||Q3 17 Return||Corporate Action|
|Kite Pharma||KITE US||73.34%||Takeover (agreed)|
|Fiat Chrysler||FCAU US||68.49%||Takeover (perceived)|
|Alcoa||AA US||42.79%||Investor Activism|
|Uniper||UN01 GY||41.16%||Takeover (perceived)|
|Worldpay||WPG LN||29.29%||Takeover (agreed)|
|Recruit||6098 JP||26.20%||Index addition|
|Nets||NETS DC||25.87%||Takeover (perceived)|
While big wins on the IP-front also lifted IPOX heavyweight drug maker Abbvie (ABBV US: 22.55%), mostly earnings-related concerns pressured select IPOX Holdings during the last quarter, including social networker Snap (SNAP US: -18.18%), European telecom Altice (ATC NA: -16.11%) or consumer staple Kraft Heinz (KHC US: -9.45%).
IPOX-linked ETF Q3 2017 Returns: FPX adds 7.17% to 18.66% YTD, FPXI rises 9.75% to 35.58% YTD. FPX and FPXI offer a granular and style-box agnostic approach to investing in the largest global New Listings (IPOs and Spin-offs), often a pure proxy for economic growth and innovation.
|IPOX Price Returns (%)||Last Week||Q3 2017||YTD 2017|
|Exposure: Global/International (xUS) (USD)|
|IPOX Global (IPGL50)||-1.19||8.63||24.20|
|IPOX Global (IPGL30)||-1.25||7.27||24.44|
|IPOX International (IPXI)*||-2.02||9.49||33.36|
|Exposure: United States (USD)|
|IPOX Composite U.S. (IPXC)*||-0.08||8.86||27.79|
|IPOX 100 U.S. (IPXO)*||0.52||7.06||18.00|
|IPOX 30 U.S. (IPXT)||0.21||7.99||19.64|
|Exposure: Europe/Nordic Region (EUR)|
|IPOX Europe (IXTE)||0.55||5.59||20.83|
|IPOX Nordic (IPND)||1.74||5.17||18.65|
|Exposure: Asia-Pacific/China Region (USD)|
|IPOX Asia-Pacific (IPTA)||-0.80||2.85||14.75|
|IPOX China C. (IPXUCHCHP)*||-2.41||12.29||37.73|
|IPOX China (CNI)||-3.57||9.59||27.87|
* Basis for ETPs: FPX US, FPX LN, FPXU FP, FPXI US, TCIP110 IT) and CME Futures (e-mini IPOX 100 U.S. Index Futures [Commodity trading symbol: IPOZ7]).
Global Deal-flow Review and Outlook: IPOs finish quarter on a strong note, more deals lined up: At least 13 accessible (non- China A shares and local India) firms commenced trading last week with the average (median) IPO adding 21.25% (10.00%) based on the difference between the final offering price and Friday’s close. Upside was strong in growth- and research oriented deals linked to specialty industries with most upside recorded by online streaming audio and video services provider Roku (ROKU US: 89.57%) and China-based RYB Education (RYB US: 54.05%), an operator of Kindergaerten and preschools in China. We note continued solid initial gains in larger China-linked IPOs debuting in the Hong Kong market, including machinery maker Precision Tsugami China (1651 HK: 48.57%) or larger ZhongAn Online P&C Insurance (6060 HK: 6.28%). More deals are set to go public this week, including Indian Financial SBI Life Insurance (SBILIFE IN), Italian tire maker ChemChina-linked Pirelli (PIRC IM) or Switch (SWCH US), the Goldman Sachs-led U.S.-based operator of data centers.
|Select IPOs traded (week: September 25, 2017)||Country|
|Camil Alimentos SA||Brazil|
|Charter Court Financial Services Group OLC||Britain|
|Deciphera Pharmaceuticals Inc||U.S.A.|
|Grupo Traxion SAB de CV||Mexico|
|Nightstar Therapeutics PLC||Britain|
|PQ Group Holdings Inc||U.S.A.|
|Precision Tsugami China Corp Ltd||China|
|Rovio Entertainment Oy||Finland|
|RYB Education Inc||China|
|ZhongAn Online P&C Insurance Co Ltd||China|
|IPOs set to debut (week: October 01, 2017)||Country|
|Balco Group AB||Sweden|
|Gima TT SpA||Italy|
|Pirelli & C. SpA||Italy|
|Rhythm Pharmaceuticals Inc.||U.S.A.|
|SBI Life Insurance Co. Ltd.||India|
Josef Schuster is the founder of IPOX Schuster LLC (www.ipoxschuster.com), a Chicago-based Financial Services company specialized in Financial Products Design related to Initial Public Offerings and corporate Spin-offs. He is the chief architect of the IPOX Indexes, a global index group initiated in 2004 that encompasses an index technology allowing for asset-allocation focused exposure to the “going public” effect associated with global IPOs and Spin-offs. Mr. Schuster earned his Bachelor of Arts degree in Business Administration in 1994 from the European Business School, London. Mr. Schuster was also awarded a MSc in Accounting and Finance in August 1996 and a MPhil / PhD in Accounting and Finance in June 2003 from the London School of Economics.
ABOUT THE IPOX INDEXES: Through the range of the IPOX Indexes, market participants have an innovative opportunity to navigate the global IPO and Spin-off market and to track the performance of this economically significant sector more accurately and comprehensively than with any other index group. The IPOX Indexes accomplish the systematic indexation of the aftermarket performance of the IPO and Spin-off sector, while – at the same time – preserving the benefits of diversification. Linked to the IPOX 100 U.S. Index, for example, IPOX-linked investment products available to investors include the pioneering USD million 600, 5-star First Trust U.S. IPO ETF (ticker: FPX). On February 18, 2016, CME Group, the world’s largest exchange operator, launched e-mini IPOX 100 U.S. Index Futures, offering market participants for the first time a tool to manage the aggregate risk associated with U.S. IPOs and Spin-offs.
Disclosure: the author has no position in the stocks mentioned.
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