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LocalShares, a newly launched provider of exchange-traded funds focused on the potential of geographic locations, such as American cities, has rolled out its debut ETF: the Nashville Area ETF (NASH). Listed on the NYSE Arca, the fund provides exposure to publicly-traded companies located in the Nashville, Tennessee area.
The fund becomes the world’s first city-based ETF – not counting ETFs based on the city-state of Singapore – and represents yet another landmark in ETF innovation.
Commenting on the launch, Michael D. Shmerling, chairman of LocalShares, said: “LocalShares has spent several years creating this concept, as well as developing our selection formula to carefully pave the way to launch the Nashville Area ETF. We believe that communities like Nashville provide significant value-add to the companies that are headquartered here. In middle Tennessee, these attributes include low taxes, a strategic location and a state where people have the right to work. Collectively, this is a solid group of diverse companies and we look forward to bringing them together in Nashville Area ETF.”
The Nashville Area ETF tracks the LocalShares Nashville Index, which uses an algorithm to identify and then weight the companies to be included in the index. The formula accounts for positive earnings, momentum and valuation metrics. In order to be included in the portfolio, companies must be headquartered in Davidson County or its surrounding counties and must meet certain requirements including market capitalisations of more than $100 million and average daily volume of stock traded that exceeds 50,000 shares.
According to Courtney, the concept of the city-based ETF was developed based on the premise that every city’s economy functions as its own ecosystem with unique resources, legislation and demographics inextricably interwoven. In developing a plan for a launch city, LocalShares concluded that Nashville met the fundamental criteria necessary for the concept.
Nashville has been called America’s healthcare hub by the Wall Street Journal, was ranked number one in the US (markets over one million persons) for job growth in 2012 according to the Bureau of Labor Statistics, and has regularly placed high on national lists for most business friendly cities. The city also maintains a high quality of life and is bolstered by its 18 colleges and universities.
Ralph Schulz, president and CEO of the Nashville Area Chamber of Commerce, said: “LocalShares is an innovative opportunity to spotlight our regional economy. The Nashville area has realised significant growth with our GDP exceeding $87 billion in 2011, up 6.05% from the previous year. We feel we are ideally situated for continued growth when you consider our geographical location and that Nashville is one of only a dozen major US cities connected to three major interstates. These attributes along with our competitive tax structure and strong workforce have allowed for a diverse base of publicly traded headquartered companies, and our competitive economic development and recruiting programs have us poised for further growth.”
Based on the current composition of the LocalShares Nashville Index, the ETF includes 24 companies that had more than $94 billion in combined revenue in 2012.