Monday, September 22nd, 2014

Direxion Closing 5 ETFs and Charging Shareholders

By Ron Rowland
16:19 pm CDT

Earlier this month, Direxion announced plans to close and liquidate five of its inverse 3x ETFs.  This Tuesday (9/23/14) will be the last day of listed trading, and liquidation will take place September 29.  We advise shareholders to dispose of their holdings prior to the delisting because remaining shareholders will bear the cost of closing the funds according to Direxion.

The affected funds are:

  1. Direxion Daily Brazil Bear 3x Shares (BRZS)
  2. Direxion Daily FTSE Europe Bear 3x Shares (EURZ)
  3. Direxion Daily Japan Bear 3x Shares (JPNS)
  4. Direxion Daily South Korea Bear 3x Shares (KORZ)
  5. Direxion Daily Natural Gas Related Bear 3x Shares (GASX)

All five ETFs have “Bull 3x” counterparts that will remain open.  It’s not clear whether this is an indication of trader preference for long vehicles or just a side effect of a multi-year bull market.  The four international funds are on ETF Deathwatch, while the natural gas fund kept itself off the list due to its high trading frequency.

The five ETFs had combined assets of less than $17 million, representing only 0.2% of the firm’s $8.4 billion in assets under management.  These products bring the total number of Direxion ETF closures to 20.

Disclosure covering writer, editor, and publisher:  No positions in any of the securities mentioned.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

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Thursday, September 18th, 2014

ETF Deathwatch for September 2014: 20% Are On The List

By Ron Rowland
15:09 pm CDT

Eighteen names were added to ETF Deathwatch for September, nine came off due to improved health, and four were removed because of closure.  The net increase of five names pushes the count to 330 products, consisting of 227 ETFs and 103 ETNs.  With 1,643 active listings at the end of August, that equates to one of every five (20%) products being on ETF Deathwatch.

Industry watchers questioned the need for gold bullion funds denominated in yen, euros, and pounds when they were introduced back in February.  Apparently, the marketplace agreed, and the AdvisorShares Gartman Gold ETFs are now on ETF Deathwatch.  Huntington has two ETFs on the market, and both were added this month, placing 100% of the firm’s ETFs in jeopardy.

Three more iPath ETNs joined the list, which seems to be fairly common for this brand.  Currently, 46 of the 72 iPath ETNs, or 64% of its product lineup, find themselves on Deathwatch.  These 46 ETNs have an average age of 54.9 months, and only two are less than 40 months old, making it difficult to claim “newness” is a factor.

The race between iShares and WisdomTree to see which firm could get a floating rate treasury ETF to market first was all for naught as both products have failed to gain any traction with investors.  Even PIMCO’s generic “FIVZ” treasury ETF finds itself struggling nearly five years after it was introduced.

Poor liquidity is the primary concern with any product listed here.  The lack of volume leads to wide bid-ask spreads and/or no depth behind those quotes.  Four products went the entire month of August without any trades, and 136 had zero volume on the last day of the month.

The average age of products on the list increased from 43.9 to 44.8 months, and 91 are now more than five years in age.  The average asset size is $6.6 million, up slightly from $6.5 million a month ago, and 56 have asset levels below $2 million.

Here is the Complete List of 330 Products on ETF Deathwatch for September 2014 compiled using the objective ETF Deathwatch Criteria.

 

The 18 ETPs added to ETF Deathwatch for September:

  1. AdvisorShares Gartman Gold/British Pound (GGBP)
  2. AdvisorShares Gartman Gold/Euro (GEUR)
  3. AdvisorShares Gartman Gold/Yen (GYEN)
  4. AdvisorShares International Gold (GLDE)
  5. Huntington EcoLogical Strategy (HECO)
  6. Huntington US Equity Rotation Strategy (HUSE)
  7. iPath DJ-UBS Platinum ETN (PGM)
  8. iPath DJ-UBS Softs ETN (JJS)
  9. iPath Pure Beta Cocoa ETN (CHOC)
  10. iShares Currency Hedged MSCI EAFE ETF (HEFA)
  11. iShares Treasury Floating Rate Bond ETF (TFLO)
  12. Market Vectors Renminbi Bond (CHLC)
  13. PIMCO 3-7 Year U.S. Treasury Index (FIVZ)
  14. PowerShares DB Japanese G-Bond Futures ETN (JGBL)
  15. ProShares UltraShort Russell2000 Growth (SKK)
  16. SPDR Barclays 0-5 Year TIPS ETF (SIPE)
  17. WisdomTree Bloomberg Floating Rate Treasury (USFR)
  18. Workplace Equality Portfolio (EQLT)

The 9 ETPs removed from ETF Deathwatch due to improved health:

  1. Alerian Energy Infrastructure ETF (ENFR)
  2. FlexShares Intl Quality Dividend Dynamic (IQDY)
  3. IQ Canada Small Cap (CNDA)
  4. iShares B – Ca Rated Corporate Bond (QLTC)
  5. iShares Baa – Ba Rated Corporate Bond (QLTB)
  6. iShares MSCI Global Energy Producers (FILL)
  7. PowerShares S&P Emerging Markets High Beta (EEHB)
  8. ProShares 30 Year TIPS/TSY Spread (RINF)
  9. PureFunds ISE Junior Silver (SILJ)

The 4 ETPs removed from ETF Deathwatch due to delisting:

  1. ALPS|GS Momentum Builder Multi-Asset Index ETF (GSMA) [ALPS Goldman Sachs ETFs to Close]
  2. ALPS|GS Momentum Builder Growth Equities and U.S. Treasuries Index ETF (GSGO)
  3. ALPS|GS Momentum Builder Asia ex-Japan Equities and U.S. Treasuries Index ETF (GSAX)
  4. ALPS|GS Risk-Adjusted Return US Large Cap Index ETF (GSRA)

ETF Deathwatch Archives

Disclosure covering writer, editor, and publisher:  No positions in any of the securities mentionedNo positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

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Wednesday, September 17th, 2014

How To Play Alibaba With ETFs – Don’t

By Ron Rowland
15:56 pm CDT

Unless you’ve been living under a rock, you are probably aware that Alibaba’s initial public offering (“IPO”) is slated for Friday.  Alibaba Group Holding Ltd. expects to raise about $23 billion, making it the largest IPO in the history of the world and valuing the company at more than $160 billion.  Although it’s known as the Chinese internet retailing behemoth, its legal structure makes it a Cayman Islands entity, and its only stock market listing will be depository shares on the NYSE with BABA as the ticker symbol.

This unique three-country confluence has put index providers in a tizzy.  It’s a Chinese company, but without a listing in Shanghai or Hong Kong, it doesn’t qualify for many Chinese stock indexes.  It will trade in the U.S. on the NYSE, but it is not an American company since it is domiciled in the Cayman Islands.  Furthermore, although it is known as an internet company, it will technically be classified as part of the consumer discretionary sector along with other retailers.  Alas, there appears to be a dearth of indexes that include U.S.-listed Chinese retailers in the Cayman Islands.

It seems every time a stock makes headline news for an extended period, you inevitably see articles touting how to play said stock with ETFs.  Whether it’s Alibaba (BABA), Apple (AAPL), Alcoa (AA), or any stock from A to Z, the way to play that stock with ETFs is the same – don’t.  Think about it a minute.  Whether a company has a 1%, 5%, or even a 20% allocation in an ETF doesn’t matter.  The best way to “play” that company is with dedicated securities.  In other words, that company’s stock, options, and warrants provide much better vehicles than watered down ETFs with the majority of their assets in other companies.

IPOs seem to generate additional interest about which ETFs will (or will not) include the new stock.  Investors hoping to profit from an opening day pop in price are out of luck.  No ETF will own BABA before it goes public, not even the ETFs that specialize in IPOs.  It’s a well-known fact that Yahoo! (YHOO) owns a big stake in Alibaba, and therefore, ETFs with a large allocation to Yahoo! could benefit from an opening day pop in Alibaba.  While that may be true, if your goal is to profit from a rise in price of Yahoo! shares, then cut out the ETF middle-man and buy Yahoo! stock or options.  The advice remains the same – do not use ETFs to play individual stocks.

Disclosure covering writer, editor, and publisher:  No positions in any of the securities mentioned.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

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Friday, September 12th, 2014

ETF Stats for August 2014 – Actively Managed ETFs Surge Past 100

By Ron Rowland
8:16 am CDT

Eighteen new products arrived in August.  All were ETFs, as the 2014 slowdown of ETN launches continues.  Most notable for the month was the fact that fourteen of the product introductions were actively managed ETFs.  These caused the ranks of currently listed actively managed ETFs to swell by 15% to 106.  Five ETFs closed during the month, leaving the month-end count at 1,643, consisting of 1,435 ETFs and 208 ETNs.

Ten of the new actively managed funds were a suite of ETFs from new sponsor WBI “targeting an optimal blend of bear market capital preservation and bull market return.”  ProShares is not new to the ETF arena, but in August, the firm brought out its first two actively managed ETFs.  These funds also entered new territory by being the first ETFs targeting credit default swaps.  First Trust added two more actively managed ETFs to its stable.  With eleven of its products carrying an “actively managed” label, First Trust is showing it is serious about this space.

Asset levels crept closer to the $2 trillion mark, with the 3.5% boost in August pushing the level slightly above $1.9 trillion.  The number of funds with more than $10 billion in assets increased from 39 to 40.  Products above $1 billion increased from 237 to 243.  However, 341 products have been unable to muster even $10 million in assets.

The 823 smallest funds represent more than half of the products on the market, yet only account for 1% of industry assets.  Another example of the lopsided distribution is the average fund has more than $1.1 billion in assets, while the median holds only $80 million.

Trading activity dropped 4.2% in August, making four months of abnormally low turnover.  Only five products averaged more than $1 billion a day in trading, but they accounted for 47.8% of all ETP dollars traded.  Products averaging more than $100 million a day in trading decreased from 76 to 75, while those averaging more than $10 million increased from 262 to 264.

August 2014 Month EndETFsETNsTotal
Currently Listed U.S.1,4352081,643
Listed as of 12/31/20131,3322041,536
New Introductions for Month18018
Delistings/Closures for Month505
Net Change for Month+130+13
New Introductions 6 Months87996
New Introductions YTD1279136
Delistings/Closures YTD24529
Net Change YTD+103+4+107
Actively-Managed Listings106 (+14) n/a106 (+14)
Assets Under Mgmt ($ billion)$1,877$28.3$1,906
% Change in Assets for Month+3.5%+4.8%+3.5%
Qty AUM > $10 Billion40040
Qty AUM > $1 Billion2376243
Qty AUM > $100 Million74137778
% with AUM > $100 Million51.6%17.8%47.4%
Monthly $ Volume ($ billion)$1,149$45.0$1,194
% Change in Monthly $ Volume-5.1%+27.5%-4.2%
Avg Daily $ Volume > $1 Billion415
Avg Daily $ Volume > $100 Million73275
Avg Daily $ Volume > $10 Million2538264
Data sources:  Daily prices and volume of individual ETPs from Norgate Premium Data.  Fund counts and all other information compiled by Invest With An Edge.

New products launched in August (sorted by launch date):

  1. Compass EMP U.S. Discovery 500 Enhanced Volatility Weighted Fund (CSF), launched 8/1/14, will invest in 500 small-cap U.S. equities that have displayed net positive earnings for four quarters.  The ETF has the ability to hedge by taking part of the portfolio to cash.  If the index has a 10% decline, the fund will liquidate 75% of its holdings.  The fund will be reinvested in full if it recoups the loss or in 25% increments each time it loses an additional 10%.  In the current allocation, the Financials sector accounts for nearly 25% of the fund.  The expense ratio will be capped at 0.68% through 10/31/15 (CSF overview).
  2. Direxion iBillionaire Index ETF (IBLN), launched 8/1/14, selects 30 large-cap U.S. equities, in which a chosen pool of investment billionaires has allocated the most assets according to SEC filings.  Net worth, source of wealth, and portfolio size will be used to select the 5-10 billionaires to be monitored.  Information Technology accounts for nearly 35% of the fund.  The fund’s expense ratio will be capped at 0.65% through 9/1/15 (IBLN overview).
  3. First Trust Enhanced Short Maturity ETF (FTSM), launched 8/6/14, is an actively managed ETF seeking to provide current income while preserving capital and maintaining daily liquidity.  It will invest in short-duration U.S. dollar-denominated securities, focusing on investment-grade bonds.  No yield information is provided.  The ETF will cap its expense ratio at 0.35% until 8/6/15 (FTSM overview).
  4. ProShares CDS North American HY Credit ETF (TYTE), launched 8/7/14, is the first actively managed ETF from ProShares.  It will provide long exposure to the credit component of high yield debt issuers in North America by investing in credit default swaps.  This is a play on the credit of these companies and not the interest on the bonds.  The expense ratio will be capped at 0.50% until 9/30/15 (TYTE overview).
  5. ProShares CDS Short North American HY Credit ETF (WYDE), launched 8/7/14, is an actively managed ETF providing inverse exposure to the credit component of high yield debt issuers in North America by investing in credit default swaps.  This is a play on the credit of these companies and not the interest on the bonds.  The expense ratio will be capped at 0.50% until 9/30/15 (WYDE overview).
  6. First Trust Strategic Income ETF (FDIV), launched 8/14/14, is an actively managed ETF seeking risk-adjusted income and capital appreciation.  It will use both fixed income investments and income-producing equities.  Some investments will also be in other funds (~25%), making it a partial fund-of-funds ETF.  The fund sports a 0.87% expense ratio (FDIV overview).
  7. iShares iBonds Sep 2020 AMT-Free Muni Bond ETF (IBMI), launched 8/14/14, extends the ladder out another year and will invest in U.S. municipal bonds that mature in 2020.  It has an estimated yield of only 1.3%, and investors will pay 0.18% per year to own the fund (IBMI overview).
  8. ProShares MSCI EAFE Dividend Growers ETF (EFAD), launched 8/21/14, will hold the stocks of at least 40 companies in countries that are members of the MSCI EAFE.  To be included, companies must have increased dividend payments in each of the last 10 years.  The holdings are equally weighted and, currently, about 47% are domiciled in the U.K.  The expense ratio will be capped at 0.50% until 9/30/15 (EFAD overview).
  9. WBI Large Cap Tactical Growth Shares (WBIE), launched 8/27/14, is an actively managed ETF that typically invests in large-cap securities with improving fundamental growth trends.  The strategy seeks to provide long-term capital appreciation, while protecting capital during unfavorable market periods with the ability to go to cash.  WBIE’s expense ratio is 1.00% (WBIE overview).
  10. WBI Large Cap Tactical Select Shares (WBIL), launched 8/27/14, is an actively managed ETF that will invest in large-cap securities with attractive value characteristics and prospects for financial stability.  The strategy seeks to provide long-term capital appreciation, while protecting capital during unfavorable market conditions.  The fund’s expense ratio is 1.00% (WBIL overview).
  11. WBI Large Cap Tactical Value Shares (WBIF), launched 8/27/14, is an actively managed ETF that typically invests in large-cap securities with consistent fundamentals and strong value characteristics.  The strategy seeks to provide long-term capital appreciation, while protecting principal during unfavorable market periods with the ability to go to cash.  WBIF sports an expense ratio of 1.00% (WBIF overview).
  12. WBI Large Cap Tactical Yield Shares (WBIG), launched 8/27/14, is an actively managed ETF that will invest in large-cap securities which present themselves as undervalued opportunities with attractive dividend yields.  The strategy seeks to provide long-term capital appreciation, while protecting principal during unfavorable market conditions.  Investors will pay 1.00% per year to own the fund (WBIG overview).
  13. WBI SMID Tactical Growth Shares (WBIA), launched 8/27/14, is an actively managed ETF that typically invests in small- and mid-cap securities that are displaying improving fundamental growth trends.  The strategy seeks to provide long-term capital appreciation, while protecting capital during unfavorable market periods with the ability to go to cash.  WBIA’s expense ratio is 1.00% (WBIA overview).
  14. WBI SMID Tactical Select Shares (WBID), launched 8/27/14, is an actively managed ETF that will invest in small- and mid-cap securities with attractive value characteristics and prospects for financial stability.  The strategy seeks to provide long-term capital appreciation, while protecting capital during unfavorable market conditions.  The fund’s expense ratio is 1.00% (WBID overview).
  15. WBI SMID Tactical Value Shares (WBIB), launched 8/27/14, is an actively managed ETF that typically invests in small- and mid-cap securities with consistent fundamentals and strong value characteristics.  The strategy seeks to provide long-term capital appreciation, while protecting principal during unfavorable market periods with the ability to go to cash.  WBIB sports an expense ratio of 1.00% (WBIB overview).
  16. WBI SMID Tactical Yield Shares (WBIC), launched 8/27/14, is an actively managed ETF that typically invests in small- and mid-cap securities which present themselves as undervalued opportunities with attractive dividend yields.  The strategy seeks to provide long-term capital appreciation, while protecting principal during unfavorable market conditions.  Investors will pay 1.00% per year to own the fund (WBIC overview).
  17. WBI Tactical High Income Shares (WBIH), launched 8/27/14, is an actively managed ETF that will seek to produce high current income by investing in income-producing debt and equity securities of foreign and domestic companies.  The strategy is designed to provide long-term capital appreciation, while protecting principal during unfavorable market periods.  The goal is to actively shorten duration to minimize loss as interest rates rise, or to lengthen duration to increase yield and potential for capital gain as interest rates decline.  Some investments will also be in other funds, making it a partial fund-of-funds ETF.  WBIH’s expense ratio is 1.08% (WBIH overview).
  18. WBI Tactical Income Shares (WBII), launched 8/27/14, is an actively managed ETF that will seek current income by investing in income-producing debt and equity securities of foreign and domestic companies.  The strategy is designed to provide long-term capital appreciation, while protecting capital during unfavorable market conditions.  The goal is to actively shorten duration to minimize loss as interest rates rise, or to lengthen duration to increase yield and potential for capital gain as interest rates decline.  Some investments will also be in other funds, making it a partial fund-of-funds ETF.  The fund has a 1.05% expense ratio (WBII overview).

Product closures/delistings in August:

  1. iShares 2014 AMT-Free Muni Bond ETF (MUAC) matured and had its last day of trading August 15.
  2. ALPS|GS Momentum Builder Multi-Asset Index ETF (GSMA) [ALPS Goldman Sachs ETFs to Close]
  3. ALPS|GS Momentum Builder Growth Equities and U.S. Treasuries Index ETF (GSGO)
  4. ALPS|GS Momentum Builder Asia ex-Japan Equities and U.S.Treasuries Index ETF (GSAX)
  5. ALPS|GS Risk-Adjusted Return US Large Cap Index ETF (GSRA)

Product changes in August:

  1. Direxion S&P 500 DRRC Index Volatility Response Shares (VSPY) changed its underlying index and became Direxion S&P 500 Volatility Response Shares (VSPY) effective August 1.
  2. KraneShares CSI China Five Year Plan ETF (KFYP) became KraneShares CSI New China ETF (KFYP) effective August 1.
  3. Deutsche Bank changed the brand on its 22 US-listed ETFs from “db X-trackers” to “Deutsche X-trackers” effective August 11.
  4. Fidelity placed five additional iShares ETFs (IUSV, IUSG, HDV, DGRO, and IEUR) on its $0 commission online trading list effective August 13.  This brings the count to 81 commission-free ETFs at Fidelity (70 iShares and 11 Fidelity).
  5. Six silver ETFs from various sponsors began using the new “London Silver Price” as a benchmark effective August 15.  Affected funds are ETFS Physical Precious Metals Basket Shares (GLTR), ETFS Physical Silver Shares (SIVR), ETFS Physical White Metals Basket Shares (WITE), iShares Silver Trust (SLV), ProShares Ultra Silver (AGQ), and ProShares UltraShort Silver (ZSL).
  6. Global X changed the index provider to MSCI on three international ETFs effective August 15.  The new names are Global X MSCI Argentina ETF (ARGT), Global X MSCI Nigeria ETF (NGE), and Global X MSCI Southeast Asia ETF (ASEA).
  7. Direxion Daily Gold Bull 3x Shares changed its ticker from GLDL to BAR and Direxion Daily Gold Bear 3x Shares changed its ticker from GLDS to BARS effective August 25.

Announced Product Changes for Coming Months:

  1. Direxion is closing five ETFs (BRZS, EURZ, JPNS, KORZ, and GASX) September 23.
  2. PIMCO to close four ETFs (AUD, CAD, BUND, and BABZ) September 26.
  3. iShares will close 18 ETFs, including their target date funds, in October.

Previous monthly ETF statistics reports are available here.

Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

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