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(Bloomberg) — Texas Capital Bank plans to launch an exchange-traded fund that will give investors exposure to companies domiciled in the Lone Star State.
The Texas Capital Texas Equity Index ETF will track an index of roughly 200 firms that are headquartered in the second-most-populous state and have a market capitalization of at least $250 million, according to a US Securities and Exchange Commission filing last week.
It’s the first exchange-traded fund from Texas Capital Bank, which hired ETF industry veteran Ed Rosenberg this year. Rosenberg declined to comment on the fund, citing a regulatory “quiet period.”
“In the Adviser’s view, the strong business environment in the State of Texas is demonstrated by, among other things, its infrastructure spending and resources, relatively low cost of conducting business, export data, and third-party rankings and recognitions,” the bank, which is based in Dallas, said in the filing.
The fund, which will trade under the ticker TXS, would be one of the only state-focused ETFs on the market. An offering that focused on businesses based in the Nashville, Tennessee, area — dubbed NASH — liquidated in 2018 with just several million dollars in assets, with the fund adviser citing regulatory and operating costs in a press release. In 2010, an Oklahoma-based firm shuttered its Texas- and Oklahoma-focused funds after less than a year of trading.
“Will a New York or California-based wealth manager want to own a Texas ETF on behalf of their clients? That seems like a tall order,” Nate Geraci, president of the ETF Store, an advisory firm, said in an email. “My sense is this ETF will have a difficult time wrangling up investors given its narrow focus.”
The poor track record doesn’t seem to have deterred Texas Capital, which is structuring the fund to track an existing equity index that weights various sectors by the amount they contribute to the state’s economy.
Within each sector, companies will then be weighted by market capitalization. That method could make TXS more a reflection of the Texas economy than prior state-focused market-cap-weighted funds, which handed the biggest weights to global companies that just happened to have headquarters in Texas.
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