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Tuesday, March 27, 2001

North Track Examines ETFs

Reported by Tamiko Toland

If indexing takes over the fund industry, how will firms differentiate themselves when the big boys such as Vanguard, Deutsche Asset Management, Barclays, and SSgA already have the market seemingly sewn up? One way is to find a niche index. Today, North Track Funds, a subsidiary of The Ziegler Companies, unveiled its next step in this strategy and its partnership with Dow Jones. Furthermore, the firm is planning a November launch of two more funds and has its eye on ETFs.

Brian Andrew executive vice president and chief investment officer of Zeigler Investment Services Group, said the firm has another pair of funds scheduled for mid-year. One will be based on the Dow Jones Food and Agribusiness Index. Andrew said the index inversely correlates to the firm's technology index. The second fund will be a global version of an existing Dow Jones product, such as the health care or financial services indexes. Andrew said the firm is "actively debating" offering an ETF, but wants to get the other fund launches out of the way first. Once Zeigler decides its next move, it will take three to six months to get rolling since it will be the firm's first venture into the ETF field. Andrew was unable to specify what area the firm is exploring for the potential ETF.

Zeigler has an exclusive deal with the Pacific Stock Exchange (PSE) and already has a North Track PSE Tech 100 Index Fund. Dow Jones will not give exclusive license terms to any firm. An ETF based on exclusive product that doesn't have to compete with a similar offering from Barclays or SSgA will fare better in the open market. Therefore, it seems likely that a North Track ETF product is likely to involve the Pacific Stock Exchange and perhaps the Tech 100 Index.

North Track has just licensed two custom Dow Jones indexes for a pair of new funds currently in registration and expected to be launched in April. The two funds are: Dow Jones US Healthcare 100 Plus Fund and Dow Jones US Financial Services 100 Plus Fund. The firm's existing ten funds, four are index funds, including two based on Dow Jones indices.

Robert J. Tuszynski, president and chief executive officer of North Track Funds, explained that the new funds are being added as a part of a response to three strategic themes the firm developed around the baby boomers: their need for technology as they age; their growing need for healthcare; and their need for financial services as they prepare to pass along and manage their estates.

North Track is planning to distribute the funds through Ziegler to the intermediary market.

"We will bundle, package and distribute these funds through the intermediary," said Tuszynski.

Along with the new funds, North Track will roll out an advisor tool kit when the funds are launched in April. The kit provides education and assistance in creating an asset mix using the family's funds. The tool allows users to seek alpha and rebuild the index without including "weak or volatile" sectors.

The moves are part of a plan to reposition Ziegler's century-old brand. The firm is best known as an underwriter for the nursing home and charity industries. This is a "brand new" look for the publicly-traded Zeigler Companies, explained John J. Mulherin, president and chief executive officer.

 

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