Elkhorn has filed for an ETF that will rely on a securities-lending strategy. The Elkhorn Rich Hard To Borrow Securities ETF (HARD) is actively managed, and will follow a strategy in which it purchases securities that have been determined to be hard to borrow and then lends them out for premium income.
The fund will rely on a “Rich Hard-To-Borrow” list that is the result of a proprietary selection methodology that looks at short interest for different stocks and other firms’ “hard to borrow” lists. This involves the unnamed firm that maintains the Elkhorn fund’s list developing its own relationships with other firms that produce their own “hard to borrow” lists, which are generally not public, the prospectus said.
The fund’s list may include equities, fixed-income securities, other ETFs and closed-end funds, according to the prospectus. Interestingly, the document also specifically states that the fund will not select stocks with the goal of price appreciation and will look to hold a market-neutral position with regard to its portfolio. It will even use derivatives to neutralize price movements.