Correspondence 0001137439-23-001346 from Macquarie ETF Trust (CIK 0001969995)
Macquarie ETF Trust (CIK 0001969995)
Date: Nov. 7, 2023 · CIK: 0001969995 · Accession: 0001137439-23-001346
AI Filing Summary & Sentiment
File numbers found in text: 333-273398, 811-23890
Letter
Division of Investment Management Washington, D.C. 20549-9303 Re: Macquarie ETF Trust (the “Registrant”) (File Nos. 333-273398 and 811-23890)
Dear Mr. Brodsky:
On behalf of the Registrant, below are responses to the comments provided us on August 23, 2023 with regard to the Registrant’s initial registration statement on Form N-1A (the “Initial Filing”) relating to (i) the Macquarie Sustainable Global Listed Infrastructure ETF (“Infrastructure Fund”); (ii) the Macquarie Energy Transition ETF; and (iii) the Macquarie Tax-Free USA Short Term ETF, each a new series of the Registrant (each a “Fund” and collectively, the “Funds”). The Initial Filing was filed with the U.S. Securities and Exchange Commission (“Commission”) on July 24, 2023 (Accession No. 0001137439-23-000915).
Below we have provided your comments and the Registrant’s responses to them. Where responses indicate revised disclosure, the Registrant will file a pre-effective amendment to the Registrant’s registration statement on Form N-1A to reflect those changes.
PROSPECTUS
Fund Summaries--Principal Investment Strategies (Infrastructure Fund) (pages 1 – 2)
1.
Comment: Please expressly describe how the Infrastructure Fund will invest its assets in investments that are tied economically to a number of countries throughout the world.
Response: The Registrant has added the following disclosure following the first sentence of the first paragraph under the Fund’s principal investment strategies section: “The Fund will invest in securities of companies that are located throughout the world, including the United States. The Fund may rely on the country where the issuer is incorporated, is headquartered or has its principal place of business in determining the
Mr. Aaron Brodsky
U.S. Securities and Exchange Commission
November 7, 2023
Page 2
location of an issuer.”
2.
Comment: Please explain whether the Fund considers “infrastructure” to be a sector or an industry, and please explain why.
Response: The Infrastructure Fund considers the various types of companies in which it invests to be part of the “infrastructure industry,” a term that is commonly used to refer to companies involved in the basic physical systems necessary for the functioning of society, including companies involved in the production of public goods or processes related to physical structures and materials, such as transportation systems, communication networks, and utilities, among others. The Fund notes that the prospectus in the Initial Filing includes a definition of what the Fund considers to be companies in the infrastructure industry, which includes companies in the utilities, energy, transportation, and communications sectors. This definition is consistent with how the infrastructure industry is defined by other registered funds with investment strategies focused in this industry. The Fund also has included an “infrastructure industry risk” in the prospectus to disclose to investors the risks unique to these types of companies. In light of this investment strategy, and given that infrastructure-related companies have similar “particular characteristics,” the Fund has adopted an 80% investment policy, pursuant to Rule 35d-1, to invest 80% of its net assets, plus the amount of any borrowings for investment purposes, in global listed infrastructure companies.
3.
Comment: The first paragraph describes the Infrastructure Fund’s sustainable investment criteria and references the Fund’s proprietary process for identifying investments that exhibit certain attributes. Please describe the Fund’s due diligence practices in applying its screening criteria. For example, although the Fund uses a proprietary process, does it rely on third-party data? If so, please disclose additional information about the use of third-party data. Explain whether the Fund’s sustainability criteria are applied to every investment the Fund makes, or only to some of its investments. Disclosure should also, if accurate, state that an investment could be made in a company that scores poorly on ESG if it scores strongly on other non-ESG factors that are considered.
Response: The Registrant has revised the disclosure as follows:
Mr. Aaron Brodsky
U.S. Securities and Exchange Commission
November 7, 2023
Page 3
“When assessing whether a company meets the Manager's sustainability objectives noted above, the Manager will rely on third-party data providers such as non-governmental organizations, sell-side research and environmental, social and governance (ESG) data providers, company websites and other disclosures, typically through corporate sustainability reports, public commitments or other investor communications, as well as information obtained from direct engagement with a company. In selecting Fund investments, the Manager also applies a harm-based exclusion screening process to exclude certain companies involved in coal, weapons, and tobacco industries, or that have serious violations of the UN Global Compact. The Fund may invest up to 20% of its net assets in securities that do not meet the Fund's sustainable investment criteria of climate change mitigation, climate change adaptation and/or positive social impact so long as such securities meet the harm-based exclusion screen test. While the Manager identifies and selects the data points it deems relevant to meeting the Fund's harm-based exclusion screening criteria, metrics relating to this criteria will be obtained primarily from external sources, including company websites and other disclosures and third-party data providers such as non-governmental organizations, sell-side research and ESG data providers.”
4.
Comment: The fourth sentence of the first paragraph references “resilience and reliability.” Please further explain how the Fund is defining each of these terms.
Response: Resilience and reliability are closely linked, with resilience being one key driver of reliability. Reliability refers to the ability of users of infrastructure assets to enjoy access to services as required. Increased reliability can also be achieved by ensuring infrastructure assets have sufficient capacity, ability to withstand variable supply and demand (in electricity networks for instance), and ability to withstand planned and unplanned outages. The Registrant utilizes the definition of resilience as defined by the Organisation for Economic Co-operation and Development (OECD), which is, in part, as follows: “The defining characteristic of climate-resilient infrastructure is that it is planned, designed, built and operated in a way that anticipates, prepares for, and adapts to changing climate conditions. It can also withstand, respond to, and recover rapidly from disruptions caused by these climate conditions.”
5.
Comment: The fifth sentence of the first paragraph states that the Fund may invest in infrastructure companies that are generating positive social impact “through the promotion of social inclusion and equal access to infrastructure assets…”. Please clarify the meaning of the phrase “social inclusion” in this context, including how “social inclusion” may differ from the concept of “equal access.”
Response: “Social inclusion” refers to making infrastructure services available to those who do not currently have access. For example, it refers to the expansion of communications infrastructure to deliver services to communities that do not currently have them. “Equal access” refers to seeking equality of access to services for customers regardless of financial status, through reduced prices for example. The Registrant has revised the disclosure accordingly:
“The Fund may also invest in infrastructure companies that are generating positive social impact through the promotion of social inclusion (i.e., expanding the availability of infrastructure services) and equal access to infrastructure assets (i.e., ensuring the provision of services regardless of financial status) that are essential for daily life and economies, such as energy, sanitation, transport and digital connectivity.”
6.
Comment: The first sentence of the third paragraph references pure infrastructure assets, including “user demand and transportation.” Please clarify the meaning of the phrase “user demand” in this context.
Response: The Registrant has deleted the term “user demand.”
Mr. Aaron Brodsky
U.S. Securities and Exchange Commission
November 7, 2023
Page 4
Fund Summaries--Principal Risks (Infrastructure Fund) (pages 2 – 4)
7.
Comment: The seventh Principal Risk factor references foreign and emerging market risks, but the Principal Strategy section for this Fund does not mention investments in emerging markets. If investments in emerging markets comprise a principal strategy for this Fund, please supplement the relevant Principal Strategy section accordingly. Alternatively, please remove emerging markets risk from the Principal Risk section for the Fund. Please also disclose how the Fund is defining “emerging markets,” as appropriate.
Response: The Registrant has added the following language to the Fund’s Principal Investment Strategies section:
“The Fund may invest in equity securities of non-U.S. companies located in emerging market countries. Emerging market countries include those currently considered to be developing by the World Bank, the United Nations, or the countries’ governments. The Fund will primarily invest in emerging markets securities of countries included in the MSCI Emerging Markets Index.”
8.
Comment: The thirteenth Principal Risk factor references “IBOR risk.” Based on the Fund's strategy disclosure, it does not appear that the Fund is investing in instruments that pay interest based on LIBOR (e.g., certain derivatives or leveraged loans). Please explain why this is a principal risk for the Fund given the Fund’s current strategy disclosure.
Response: The Registrant confirms that it has removed “IBOR risk” from the Fund’s principal risks disclosure.
Fund Summaries--Principal Investment Strategies (Energy Transition Fund) (pages 6 – 8)
9.
Comment: The first sentence of the first paragraph indicates that the Fund will invest in securities in various sectors, including “materials.” Please clarify how the Fund is defining “materials.” Please also explain how investments in the “materials” sector is consistent with the Fund’s focus on “transition enablers.”
Response: The materials sector consists of companies involved in metals and mining extraction, and refining and processing, as well as companies in the chemical and industrial gas industries. The Energy Transition Fund’s investments in such companies within the materials sector is consistent with the Fund’s focus on “transition enablers” because such companies provide the inputs or elements that will allow the production of significant non-hydrocarbon energy and power and, as such, enable energy transition. Examples include copper, a key material in electric vehicles and transmission wires; ammonia, which can provide low carbon liquid fuels; and hydrogen, which can help with decarbonization.
Mr. Aaron Brodsky
U.S. Securities and Exchange Commission
November 7, 2023
Page 5
10.
Comment: The first sentence of the first paragraph references “the Fund’s investment criteria noted below.” Because several criteria are described in subsequent disclosures, please more specifically reference the relevant criteria for purposes of the Fund’s 80% policy.
Response: The Registrant has added the following sentence after the first sentence of the first paragraph in the Fund’s principal investment strategies section: “The investment criteria includes companies that meet the Manager’s definition of “transition enablers” or “responsible producers,” as further described below.”
11.
Comment: The third sentence of the second paragraph indicates that transition enablers have a “significant portion” of their business committed to certain activities. Please disclose how the Fund is defining “significant portion.”
Response: The Registrant has amended the third sentence of the second paragraph as follows:
“The Manager considers companies to be “transition enablers” that have a portion of their business committed to actively developing, and/or exposed to, products and services designed to produce lower-emitting alternatives to fossil fuels, or providers of services or materials required for the energy transition or low greenhouse gas energy production.”
12.
Comment: The third sentence of the second paragraph references providers of services or materials “required” for the energy transition or low greenhouse gas energy production. Please more specifically define how the Fund determines if a provider of services or materials is “required” for the energy transition or low greenhouse gas energy production.
Response: The disclosure is not intended to state that a provider is required; rather, what is required is the services or materials provided by such a provider. To clarify how the Registrant identifies such requisite materials and services, the Registrant has added the following disclosure following the last sentence of the second paragraph:
“In seeking to identify “transition enablers,” the Manager uses proprietary and third-party research to determine what technologies have the greatest likelihood of succeeding and profiting from the energy transition. The Manager then uses this macro view to determine the individual components and services that will be required to fully deploy these technologies. For example, the Manager believes the deployment of solar, wind power and electric vehicles are likely to witness an increase in demand from the energy transition, while basic materials essential to the production and implementation of such technologies (e.g., copper or aluminum), will also serve as catalysts for an energy transition.”
Mr. Aaron Brodsky
U.S. Securities and Exchange Commission
November 7, 2023
Page 6
13.
Comment: The last sentence of the third paragraph references companies that need to operate in a socially responsible manner while ensuring proper governance, especially when operating in higher risk jurisdictions. Please describe the criteria used to determine if a company operates in a socially responsible manner and ensures proper governance. Please als
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filename1.htm
Stradley Ronon Stevens & Young, LLP
191 North Wacker Drive
Suite 1601
Chicago, IL 60606
Telephone 312.964.3500
Fax 312.964.3501
www.stradley.com
November 7, 2023
Filed via EDGAR
Mr. Aaron Brodsky
U.S. Securities and Exchange Commission
Division of Investment Management
100 F Street, N.E.
Washington, D.C. 20549-9303
Re:
Macquarie ETF Trust (the “Registrant”)
(File Nos. 333-273398 and 811-23890)
Dear Mr. Brodsky:
On behalf of the Registrant, below are responses to the comments provided us on August 23, 2023 with regard to the Registrant’s initial registration statement on Form N-1A (the
“Initial Filing”) relating to (i) the Macquarie Sustainable Global Listed Infrastructure ETF (“Infrastructure Fund”); (ii) the Macquarie Energy Transition ETF; and (iii) the Macquarie Tax-Free USA Short Term ETF, each a new series of the
Registrant (each a “Fund” and collectively, the “Funds”). The Initial Filing was filed with the U.S. Securities and Exchange Commission (“Commission”) on July 24, 2023 (Accession No. 0001137439-23-000915).
Below we have provided your comments and the Registrant’s responses to them. Where responses indicate revised disclosure, the Registrant will file a pre-effective amendment to the
Registrant’s registration statement on Form N-1A to reflect those changes.
PROSPECTUS
Fund Summaries--Principal Investment Strategies (Infrastructure Fund) (pages 1 – 2)
1.
Comment: Please expressly describe how the Infrastructure Fund will invest its assets in investments that are tied economically to a number of countries throughout the world.
Response: The Registrant has added the following disclosure following the first sentence of the first paragraph under the Fund’s principal investment strategies section: “The Fund will invest in securities of companies that are located throughout the world, including the United States. The Fund may rely on the country where the issuer is incorporated, is headquartered or has its principal
place of business in determining the
Mr. Aaron Brodsky
U.S. Securities and Exchange Commission
November 7, 2023
Page 2
location of an issuer.”
2.
Comment: Please explain whether the Fund considers “infrastructure” to be a sector or an industry, and please explain why.
Response: The Infrastructure Fund considers the various types of companies in which it invests to be part of the “infrastructure industry,” a term that is commonly used to refer to companies
involved in the basic physical systems necessary for the functioning of society, including companies involved in the production of public goods or processes related to physical structures and materials, such as transportation systems, communication
networks, and utilities, among others. The Fund notes that the prospectus in the Initial Filing includes a definition of what the Fund considers to be companies in the infrastructure industry, which includes companies in the utilities, energy,
transportation, and communications sectors. This definition is consistent with how the infrastructure industry is defined by other registered funds with investment strategies focused in this industry. The Fund also has included an “infrastructure
industry risk” in the prospectus to disclose to investors the risks unique to these types of companies. In light of this investment strategy, and given that infrastructure-related companies have similar “particular characteristics,” the Fund has
adopted an 80% investment policy, pursuant to Rule 35d-1, to invest 80% of its net assets, plus the amount of any borrowings for investment purposes, in global listed infrastructure companies.
3.
Comment: The first paragraph describes the Infrastructure Fund’s sustainable investment criteria and references the Fund’s proprietary process for identifying investments that exhibit certain attributes.
Please describe the Fund’s due diligence practices in applying its screening criteria. For example, although the Fund uses a proprietary process, does it rely on third-party data? If so, please disclose additional information about the use
of third-party data. Explain whether the Fund’s sustainability criteria are applied to every investment the Fund makes, or only to some of its investments. Disclosure should also, if accurate, state that an investment could be made in a
company that scores poorly on ESG if it scores strongly on other non-ESG factors that are considered.
Response: The Registrant has revised the disclosure as follows:
Mr. Aaron Brodsky
U.S. Securities and Exchange Commission
November 7, 2023
Page 3
“When assessing whether a company meets the Manager's sustainability objectives noted above, the Manager will rely on third-party data providers such as non-governmental organizations, sell-side research and environmental, social and governance
(ESG) data providers, company websites and other disclosures, typically through corporate sustainability reports, public commitments or other investor communications, as well as information obtained from direct engagement with a company. In
selecting Fund investments, the Manager also applies a harm-based exclusion screening process to exclude certain companies involved in coal, weapons, and tobacco industries, or that have serious violations of the UN Global Compact. The Fund may
invest up to 20% of its net assets in securities that do not meet the Fund's sustainable investment criteria of climate change mitigation, climate change adaptation and/or positive social impact so long as such securities meet the harm-based
exclusion screen test. While the Manager identifies and selects the data points it deems relevant to meeting the Fund's harm-based exclusion screening criteria, metrics relating to this criteria will be obtained primarily from external sources,
including company websites and other disclosures and third-party data providers such as non-governmental organizations, sell-side research and ESG data providers.”
4.
Comment: The fourth sentence of the first paragraph references “resilience and reliability.” Please further explain how the Fund is defining each of these terms.
Response: Resilience and reliability are closely linked, with resilience being one key driver of reliability. Reliability refers to the ability of users of infrastructure assets to enjoy access
to services as required. Increased reliability can also be achieved by ensuring infrastructure assets have sufficient capacity, ability to withstand variable supply and demand (in electricity networks for instance), and ability to withstand planned
and unplanned outages. The Registrant utilizes the definition of resilience as defined by the Organisation for Economic Co-operation and Development (OECD), which is, in part, as follows: “The defining characteristic of climate-resilient
infrastructure is that it is planned, designed, built and operated in a way that anticipates, prepares for, and adapts to changing climate conditions. It can also withstand, respond to, and recover rapidly from disruptions caused by these climate
conditions.”
5.
Comment: The fifth sentence of the first paragraph states that the Fund may invest in infrastructure companies that are generating positive social impact “through the promotion of social inclusion and
equal access to infrastructure assets…”. Please clarify the meaning of the phrase “social inclusion” in this context, including how “social inclusion” may differ from the concept of “equal access.”
Response: “Social inclusion” refers to making infrastructure services available to those who do not currently have access. For example, it refers to the expansion of communications
infrastructure to deliver services to communities that do not currently have them. “Equal access” refers to seeking equality of access to services for customers regardless of financial status, through reduced prices for example. The Registrant has
revised the disclosure accordingly:
“The Fund may also invest in infrastructure companies that are generating positive social impact through the promotion of social inclusion (i.e., expanding the availability of infrastructure services)
and equal access to infrastructure assets (i.e., ensuring the provision of services regardless of financial status) that are essential for daily life and economies, such as energy, sanitation, transport and digital connectivity.”
6.
Comment: The first sentence of the third paragraph references pure infrastructure assets, including “user demand and transportation.” Please clarify the meaning of the phrase “user demand” in this context.
Response: The Registrant has deleted the term “user demand.”
Mr. Aaron Brodsky
U.S. Securities and Exchange Commission
November 7, 2023
Page 4
Fund Summaries--Principal Risks (Infrastructure Fund) (pages 2 – 4)
7.
Comment: The seventh Principal Risk factor references foreign and emerging market risks, but the Principal Strategy section for this Fund does not mention investments in emerging markets. If investments
in emerging markets comprise a principal strategy for this Fund, please supplement the relevant Principal Strategy section accordingly. Alternatively, please remove emerging markets risk from the Principal Risk section for the Fund. Please
also disclose how the Fund is defining “emerging markets,” as appropriate.
Response: The Registrant has added the following language to the Fund’s Principal Investment Strategies section:
“The Fund may invest in equity securities of non-U.S. companies located in emerging market countries. Emerging market countries include those currently considered to be developing by the World Bank,
the United Nations, or the countries’ governments. The Fund will primarily invest in emerging markets securities of countries included in the MSCI Emerging Markets Index.”
8.
Comment: The thirteenth Principal Risk factor references “IBOR risk.” Based on the Fund's strategy disclosure, it does not appear that the Fund is investing in instruments that pay interest based on LIBOR
(e.g., certain derivatives or leveraged loans). Please explain why this is a principal risk for the Fund given the Fund’s current strategy disclosure.
Response: The Registrant confirms that it has removed “IBOR risk” from the Fund’s principal risks disclosure.
Fund Summaries--Principal Investment Strategies (Energy Transition Fund) (pages 6 – 8)
9.
Comment: The first sentence of the first paragraph indicates that the Fund will invest in securities in various sectors, including “materials.” Please clarify how the Fund is defining “materials.” Please
also explain how investments in the “materials” sector is consistent with the Fund’s focus on “transition enablers.”
Response: The materials sector consists of companies involved in metals and mining extraction, and refining and processing, as well as companies in the chemical and industrial gas industries. The Energy Transition Fund’s
investments in such companies within the materials sector is consistent with the Fund’s focus on “transition enablers” because such companies provide the inputs or elements that will allow the production of significant non-hydrocarbon
energy and power and, as such, enable energy transition. Examples include copper, a key material in electric vehicles and transmission wires; ammonia, which can provide low carbon liquid fuels; and hydrogen, which can help with
decarbonization.
Mr. Aaron Brodsky
U.S. Securities and Exchange Commission
November 7, 2023
Page 5
10.
Comment: The first sentence of the first paragraph references “the Fund’s investment criteria noted below.” Because several criteria are described in subsequent disclosures, please more specifically
reference the relevant criteria for purposes of the Fund’s 80% policy.
Response: The Registrant has added the following sentence after the first sentence of the first paragraph in the Fund’s principal investment strategies section: “The investment criteria
includes companies that meet the Manager’s definition of “transition enablers” or “responsible producers,” as further described below.”
11.
Comment: The third sentence of the second paragraph indicates that transition enablers have a “significant portion” of their business committed to certain activities. Please disclose how the Fund is
defining “significant portion.”
Response: The Registrant has amended the third sentence of the second paragraph as follows:
“The Manager considers companies to be “transition enablers” that have a portion of their business committed to actively developing, and/or exposed to, products and services designed to produce
lower-emitting alternatives to fossil fuels, or providers of services or materials required for the energy transition or low greenhouse gas energy production.”
12.
Comment: The third sentence of the second paragraph references providers of services or materials “required” for the energy transition or low greenhouse gas energy production. Please more specifically
define how the Fund determines if a provider of services or materials is “required” for the energy transition or low greenhouse gas energy production.
Response: The disclosure is not intended to state that a provider is required; rather, what is required is the services or materials provided by such a provider. To clarify how the Registrant
identifies such requisite materials and services, the Registrant has added the following disclosure following the last sentence of the second paragraph:
“In seeking to identify “transition enablers,” the Manager uses proprietary and third-party research to determine what technologies have the greatest likelihood of succeeding and profiting from the
energy transition. The Manager then uses this macro view to determine the individual components and services that will be required to fully deploy these technologies. For example, the Manager believes the deployment of solar, wind power and
electric vehicles are likely to witness an increase in demand from the energy transition, while basic materials essential to the production and implementation of such technologies (e.g., copper or aluminum), will also serve as catalysts for an
energy transition.”
Mr. Aaron Brodsky
U.S. Securities and Exchange Commission
November 7, 2023
Page 6
13.
Comment: The last sentence of the third paragraph references companies that need to operate in a socially responsible manner while ensuring proper governance, especially when operating in higher risk
jurisdictions. Please describe the criteria used to determine if a company operates in a socially responsible manner and ensures proper governance. Please als