A group of well-known locals is launching an investment vehicle for those interested in putting money to work only in companies based in Middle Tennessee.
LocalShares Inc. was founded earlier this year on behalf of Beth Courtney, chairman and CEO of Seigenthaler Public Relations, serial entrepreneur Mike Shmerling and Jim Phillips of XMi as well as Relevance Capital Managing Partner Cameron Newton. On Monday, the company filed papers to launch NashvilleETF, an exchange-traded fund that will offer a locally focused investment option and try to succeed where other similar ventures have recently failed.
NashvilleETF will passively invest in the stocks of companies based here, with a market value of at least $100 million and a trading volume of at least 50,000 shares per day. As of Monday afternoon, 28 local companies met the market cap threshold but a few — Cumberland Pharmaceuticals, National HealthCare and First Farmers & Merchants — fell short of the liquidity minimum. The remaining stocks range from Dollar General and HCA Holdings — which have market caps of $17 billion and $15 billion — to BioMimetic Therapeutics, which closed Monday trading valued at about $120 million. About half of the companies are in health care.
The firm — a website should go live soon here — has contracted with Decker Wealth Management to manage the fund and will pay the firm $62,500 per year plus 3 basis points of the fund's assets. As of June of this year, Decker managed about $92 million in about 250 accounts. The fund will weight all stocks evenly to start, but any name in the group can grow to twice that weight. Total fund expenses will be 0.49 percent of assets per year; LocalShares will cover any costs above that ratio until at least May of 2014. The ETF's prospectus outlines other operational details as well as the risks associated with investing in a hyper-focused group of stocks.
Decker and the rest of the LocalShares team will face the usual challenges that come with launching an ETF in a crowded market. The very narrow focus of their product will add to the risks, as another investment company found a few years ago. Oklahoma City-based Geary Advisors in late 2009 launched ETFs focused on companies headquartered in Texas and Oklahoma. Unable to attract enough assets to make the funds' economics work — combined, they held only about $15 million the following summer — the firm was forced to shut them down within a year.
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- COOKE, ETHEN LANYARD TRUSTEE; COOKE, ETHEN LEWIS ESTATE
- JACOBS, JESSICA ALEXANDRA; JACOBS, ERIKA BESS