Wednesday, February 07, 2007

Value Line 100 Fund to be reorganized into ETF

First Trust has filed with the SEC a plan to reorganize the First Trust Value Line 100 Fund (FVL) into a new ETF (FTA). This is the second direct closed end to ETF conversion done by first trust. The new ETF will track an index of the 100 stocks ranked #1 by Value Line for timeliness, reconstituted monthly.

The old FVL fund tracked the VL100 stocks in real time as they were updated every week. This lead to massive turnover (roughly 400% per year) and eyewatering short term capital gains distributions. The new ETF should be much more tax efficient.

To protect value line's intellectual property, the new ETF doesn't track the VL100 index exactly, as you would get in weekly updates if you subscribed to the Value Line service. Still, the new First Trust Value Line 100 ETF (FTA) should track the famous VL100 index more closely than the current Powershares ValueLine Timeliness Select Portfolio (PIV) does. FTA is the Value Line ETF that everyone wanted in the first place.