Friday, August 19th, 2016

ETF Stats for July 2016: ETNs with Unpredictable Uncapped Fees

By Ron Rowland
15:29 pm CDT

Sixteen launches and two closures in July increased the overall product count to 1,945 (1,739 ETFs and 206 ETNs).  Assets climbed by 5.3% to $2.37 trillion, driven primarily by market gains.  August is shaping up to be the worst month ever for ETF mortality, with 41 ETFs and ETNs slated for closure during the month.

VelocityShares rolled out three new ETNs in July (issued by UBS) that are linked to indexes tracking various volatility strategies.  According to the prospectus, the ETNs have a daily investor fee of 1.30% (divided by 365) and a futures spread fee that “is uncapped, is based on market inputs that are beyond UBS’s control, and may vary significantly from day to day.”

This is wrong on multiple fronts.  First, ETNs do not own anything—they are unsecured debt obligations of the issuer.  Therefore, the ETNs do not have any futures transactions fees—only the issuer does if it chooses to hedge its position.  Second, UBS included a seven-page description of this fee, plus “Annex C – Hypothetical Calculations of the Futures Spread Fee” that, based on three scenarios, claims the futures spread fee will only be 0.006% to 0.007%.  However, it fails to point out that these are daily fees—not an annual expense ratio.

Assuming 252 business days per year, this daily fee works out to be 1.51% to 1.76% per annum on top of the 1.30% investor fee.  Regulators were apparently asleep at the wheel as VelocityShares and UBS slipped this one by them.  These ETNs own nothing, but by including these uncapped expenses, UBS has shifted all of the hedging cost risks off itself and onto (unaware) shareholders.

This isn’t the first time UBS has tried to bury expenses by stating them in periods other than per annum.  Back in 2011, UBS introduced VIX ETNs with a 1.35% annual tracking fee and a 0.077% weekly event risk hedging cost, compounded daily.  That worked out to be about a 5.35% annual expense ratio that also slipped by regulators.

The $118 billion increase in U.S.-listed ETF and ETN assets for July was composed of $43.7 billion of net inflows and $74.6 billion in market gains.  The quantity of funds with more than $10 billion in assets held steady at 55 and control 60.3% of industry assets.  Just 853 funds have asset levels above $100 million, but these 43.9% of listings hold 99.4% of the assets.  The majority—the other 1,092 ETFs and ETNs—are fighting for the remaining 0.6% of assets.

July 2016 Month EndETFsETNsTotal
Currently Listed U.S.1,7392061,945
Listed as of 12/31/20151,6442011,845
New Introductions for Month12416
Delistings/Closures for Month202
Net Change for Month+10+4+14
New Introductions 6 Months11412126
New Introductions YTD12812140
Delistings/Closures YTD33740
Net Change YTD+95+5+100
Assets Under Management$2,346 B$24.5 B$2,371 B
% Change in Assets for Month+5.3%+2.6%+5.3%
% Change in Assets YTD+11.9%+14.0%+11.9%
Qty AUM > $10 Billion55055
Qty AUM > $1 Billion2655270
Qty AUM > $100 Million81538853
% with AUM > $100 Million46.9%18.5%43.9%
AUM Flows for Month $42.95 B$0.79 B$43.74 B
AUM Flows YTD $116.2 B$2.3 B$118.5 B
Monthly $ Volume $1,330 B$53.8 B$1,384 B
% Change in Monthly $ Volume-26.0%-36.8%-26.5%
Avg Daily $ Volume > $1 Billion909
Avg Daily $ Volume > $100 Million86591
Avg Daily $ Volume > $10 Million32910339
Actively Managed ETF Count (w/ change)151+2 mth+14 ytd
Actively Managed AUM $26.4 B+3.8% mth+15.0% ytd
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 July (sorted by launch date):

  1. AdvisorShares Cornerstone Small Cap ETF (SCAP), launched 7/7/16, is an actively managed ETF seeking to provide total return through long-term capital appreciation and current income.   It invests in a diversified group of U.S.-traded equity securities and attempts to benefit from the volatility of small cap stocks by participating in upside volatility while reducing exposure to downside volatility.  Its expense ratio is capped at 0.90% (SCAP overview).
  2. Global X Conscious Companies ETF (KRMA), launched 7/12/16, intends to track the Concinnity Conscious Companies Index, which is designed to invest in well-managed U.S. companies that achieve financial performance in a sustainable and responsible manner by exhibiting positive environmental, social, and corporate governance (“ESG”) characteristics.  The ETF has an expense ratio of 0.43% (KRMA overview).
  3. Credit Suisse X-Links Monthly Pay 2xLeveraged Mortgage REIT ETN (REML), launched 7/13/16, is an exchange-traded note (“ETN”) that provides monthly-compounded 2x leveraged long exposure to the price return version of the FTSE NAREIT All Mortgage Capped Index. The ETNs pay a variable monthly coupon linked to the net cash distributions.  It will assess owners a tracking rate of 0.50% per annum and a financing rate pegged at 3-month LIBOR plus 0.80% per annum.  Therefore, the total expense ratio will be at least 1.30% (REML overview).
  4. Cambria Emerging Shareholder Yield ETF (EYLD), launched 7/14/16, tracks an index of emerging-market stocks with high cash distribution characteristics.  It holds the 100 companies (equally weighted) with the best-combined rank of dividend payments and net stock buybacks, which are the key components of shareholder yield.  The underlying index also screens for value, quality, and for companies that demonstrate low financial leverage.  EYLD has an expense ratio of 0.69% (EYLD overview).
  5. FlexShares STOXX Global ESG Impact Index Fund (ESGG), launched 7/14/16, tracks an underlying index of global developed country companies based on ESG key performance indicators.  It tilts the portfolio toward companies with higher total aggregate ESG scores and uses constraints in an effort to minimize overall risk.  The expense ratio is 0.42% (ESGG overview).
  6. FlexShares STOXX US ESG Impact Index Fund (ESG), launched 7/14/16, tracks an underlying index of U.S. companies based on ESG key performance indicators.  It tilts the portfolio toward companies with higher total aggregate ESG scores and uses constraints in an effort to minimize overall risk.  The expense ratio is 0.32% (ESG overview).
  7. PowerShares DWA Momentum & Low Volatility Rotation Portfolio (DWLV), launched 7/14/16, is a fund-of-funds ETF that tracks an index designed to gain exposure to U.S. or international equity markets.  The universe is currently limited to the eight PowerShares momentum and low-volatility ETFs, and it may also hold up to a 100% cash position (via 1- to 6-month U.S. Treasury bills) when equity securities are out of favor.  The underlying index and ETF perform monthly evaluations for potential rebalancing and reconstitution.  DWLV has an expense ratio of 0.52% (DWLV overview).
  8. VanEck Vectors EM Investment Grade + BB Rated USD Sovereign Bond ETF (IGEM), launched 7/14/16, tracks an underlying index composed primarily of investment-grade U.S. dollar–denominated bonds issued by emerging-markets governments.  Its expense ratio is capped at 0.40% (IGEM overview).
  9. VelocityShares VIX Short Volatility Hedged ETN (XIVH), launched 7/14/16, intends to provide a net short position in VIX futures.  It is one of the three volatility-strategy ETNs that hope to relieve investors of the need to actively trade underlying positions on a daily basis.  XIVH is linked to the total return version of the S&P 500 VIX Futures Short Volatility Hedged Index TR–Short Term.  Each of the 13 subportfolios has a target exposure of 10% to a 2x leveraged long position and a 90% unleveraged short position, which is intended to result in a net short position in VIX futures.  In addition to an investor fee of 1.30%, XIVH will charge an unpredictable and uncapped futures spread fee (XIVH overview).
  10. VelocityShares VIX Tail Risk ETN (BSWN), launched 7/14/16, intends to result in a net long position in VIX futures.  It is one of the three volatility-strategy ETNs that hope to relieve investors of the need to actively trade underlying positions on a daily basis.  BSWN is linked to the total return version of the S&P 500 VIX Futures Tail Risk Index TR–Short Term.  Each of the 13 subportfolios has a target exposure of 45% to a 2x leveraged long position and a 55% unleveraged short position, which is intended to result in a net long position in VIX futures.  In addition to an investor fee of 1.30%, BSWN will charge an unpredictable and uncapped futures spread fee (BSWN overview).
  11. VelocityShares VIX Variable Long/Short ETN (LSVX), launched 7/14/16, intends to provide a net long or net short exposure to VIX futures, with the goal of having a net long exposure during periods of high volatility and a net short exposure during periods of low volatility.  It is one of the three volatility-strategy ETNs that hope to relieve investors of the need to actively trade underlying positions on a daily basis.  LSVX is linked to the total return version of the S&P 500 VIX Futures Variable Long/Short Index TR–Short Term.  Each of the 13 subportfolios has a target exposure of 33.3% to 2x leveraged long position and a 66.7% unleveraged short position, which is intended to result in a net long or net short exposure to VIX futures, depending on market conditions.  In addition to an investor fee of 1.30%, BSWN will charge an unpredictable and uncapped futures spread fee (LSVX overview).
  12. The 3D Printing ETF (PRNT), launched 7/19/16 by ARK Investments, intends to track the Solactive Total 3D-Printing Index, which is composed of equity securities and depositary receipts of companies from the U.S., non-U.S. developed markets, and Taiwan that are engaged in 3D printing–related businesses.  The universe of business lines includes 3D printing hardware, computer-aided design, 3D printing simulation software, 3D printing centers, scanning and measurement, and 3D printing materials.  Its largest allocations will include 50% to printing hardware, 30% to software, and 13% to service centers.  PRNT has an expense ratio of 0.66% (PRNT overview).
  13. Direxion Daily European Financials Bull 2x Shares (EUFL), launched 7/27/16, seeks daily investment results of 200% of the performance of the MSCI Europe Financials Index, which represents securities of large-capitalization and mid-capitalization companies across developed market countries in Europe.  Its expense ratio is capped at 0.80% (EUFL overview).
  14. Direxion Daily Gold Miners Index Bear 1x Shares (MELT), launched 7/27/16, seeks daily investment results of 100% of the inverse (or opposite) of the performance of the NYSE Arca Gold Miners Index.  It consists of publicly traded companies that operate globally in both developed and emerging markets that are involved primarily in the mining of gold and silver.  Its expense ratio is capped at 0.45% (MELT overview).
  15. WBI Tactical Rotation Shares (WBIR), launched 7/27/16, is an actively managed fund-of-funds ETF designed to take advantage of opportunities around the globe while seeking to protect capital during unfavorable market conditions.  The ETF may invest in any global asset class, geographic region, country, index, sector, industry, currency, or cash equivalents.  A proprietary model assesses factors and conditions likely to affect the potential risk-adjusted return of the investment opportunities under consideration.  WIBR comes with an expense ratio of 1.43% (WBIR overview).
  16. Legg Mason International Low Volatility High Dividend ETF (LVHI), launched 7/28/16, tracks a multifactor underlying index composed of equity securities of developed markets outside the United States with relatively high yield, low price, and low earnings volatility.  The fund hedges its exposure to fluctuations between the U.S. dollar and other international currencies.  LVHI has an expense ratio of 0.40% (LVHI overview).

Product closures in July and last day of listing:

  1. Falah Russell-IdealRatings U.S. Large Cap (FIA), 7/14/16
  2. Direxion Daily Total Market Bear 1x Shares (TOTS), 7/15/16

Product changes in July:

  1. AdvisorShares TrimTabs Float Shrink ETF (TTFS) changed its subadvisor and was renamed the AdvisorShares Wilshire Buyback ETF (TTFS) effective July 1 (TrimTabs response).
  2. Effective July 1, 2016, iShares changed from Barclays to ICE U.S. Treasury Bond Index Series indexes for iShares Core U.S. Treasury Bond ETF (GOVT), iShares Short Treasury Bond ETF (SHV), and iShares 10-20 Year Treasury Bond ETF (TLH).
  3. Morgan Stanley announced it would not issue any more notes for five of its ETNs effective July 1, thereby rendering them broken products without a functioning creation mechanism.  The affected products are Morgan Stanley Cushing MLP High Income ETN (MLPY), VanEck Vectors Double Long Euro ETN (URR), VanEck Vectors Double Short Euro ETN (DRR), VanEck Vectors Chinese Renminbi/USD ETN (CNY), and VanEck Vectors Indian Rupee/USD ETN (INR).
  4. The SPDR Quality Mix suite of 13 ETFs were rebranded as the SPDR StrategicFactors suite effective July 15.
  5. AccuShares Spot CBOE VIX Down Shares (VXDN) received a regular distribution of 1.610701 VXUP shares and 1.610701 VXDN shares, and a corrective distribution of one VXUP share effective July 20.
  6. AccuShares Spot CBOE VIX Up Shares (VXUP) received a corrective distribution of one VXDN share effective July 20.
  7. BlackRock iShares performed forward splits on 11 of its ETFs (ITOT, IUSG, IUSV, IUSB, ISTB, IBCC, IBCD, IBCE, IBDB, IBDC, and IBDD) effective July 22.
  8. ProShares effected ETF splits on July 22.  UGE, UPW, CMD, UXI, and KOLD underwent forward splits, and GDXS, VIXY, and UVXY had reverse splits.

Announced product changes for coming months:

  1. EGShares EM Strategic Opportunities (EMSO) is changing its ticker symbol back to EMDD.  Back on March 1, the fund changed both its name and ticker from EGShares Emerging Markets Domestic Demand (EMDD) to EGShares EM Strategic Opportunities (EMSO).  It is now reverting to its previous ticker symbol while keeping its newer name.
  2. Huntington US Equity Rotation Strategy ETF (HUSE) will drop the Huntington prefix and change its name to US Market Rotation Strategy (HUSE), effective August 8.
  3. VelocityShares Daily 2x VIX Short Term ETN (TVIX) will effect a 1-for-25 reverse split effective August 9.
  4. AccuShares Spot CBOE VIX Down Shares (VXDN) will receive a corrective distribution payable in shares of VXUP effective August 17.
  5. AccuShares Spot CBOE VIX Up Shares (VXUP) will receive a corrective distribution payable in shares of VXDN effective August 17.
  6. BlackRock plans to close and liquidate 10 iShares ETFs.  August 23 will be the last day of listed trading for EEML, EMHZ, IEIL, IELG, IEIS, IESM, ITIP, GTIP, QLTB, and QLTC.
  7. SPDRs is closing 12 of its ETFs with August 24 being their last day of listed trading.  The closing funds are EMBB, SMCD, IJNK, EMFT, JPP, JSC, MDD, BIK, RORO, BABS, CXA, and INY.
  8. ProShares is closing and liquidating nine ETFs.  August 25 will be the last day of trading for UCD, CMD, UXJ, JPX, HBU, HBZ, IGU, IGS, and GDJS.
  9. The iShares iBonds Sep 2016 Term Muni Bond ETF (IBME) is scheduled to mature and will cease trading at the market’s close on September 1, 2016.
  10. Cambria has agreed to take over management of the recently launched Dhandho Junoon ETF (JUNE).  No date has been set for the change.

Previous monthly ETF statistics reports are available here.

Disclosure: Author has no positions in any of the securities, companies, or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) is received from, or on behalf of, any of the companies or ETF sponsors mentioned.

- Print This Page Print This Page




Friday, July 29th, 2016

ETF Deathwatch for July 2016: Closing In On 500 Names

By Ron Rowland
8:35 am CDT

The quantity of funds on ETF Deathwatch climbed by 18 for July with the addition of 24 new names and the removal of six.  Only three of those leaving did so by improving their health.  The other three left in a casket.  The new count is 490 (380 ETFs and 110 ETNs), and it will likely surpass 500 next month if the current pace continues.

Based on the 1,931 listings at the end of June, the 490 funds on ETF Deathwatch suggests that 25.4% of the funds more than six months old are both illiquid and vulnerable to closure.  Another 124 (6.4%) are excluded from this calculation because they were launched in the past six months and are given a grace period.

Two weeks ago, the industry crossed a milestone with the 600th ETF closure.  The lifetime mortality rate for U.S. ETFs and ETNs now stands at 23.6%.  Given that 25.4% of the still-living products are on ETF Deathwatch, and another 6.4% may potentially join the list when they achieve six months of age, suggests that more than half of all the products launched so far may not survive.  It behooves you to pay attention and not buy just any ETF with a catchy name, ticker symbol, or fancy marketing campaign.

The average asset level of products on ETF Deathwatch increased from $7.0 million to $7.2 million, and the quantity of products with less than $2 million in assets grew from 92 to 96.  The average age increased from 47.2 to 47.7 months, and the number of products more than five years of age jumped from 187 to 197.  Nearly 200 products have been losing money for their sponsors for more than five years.  The reasons are not clear, but here are some possibilities:

  • The fund is part of a strategic lineup.
  • The sponsor is convinced it’s “just a matter of time” before assets increase.
  • The sponsor is in denial and/or believes closing would be an admission of failure.
  • The board is unaware of the situation.

At least one ETF sponsor has told me it has never closed an ETF and it intends to never close one.  This appears to be some sort of false pride, as this sponsor believes it would be an admission of failure instead of embracing the benefits of closing an unprofitable ETF.

Many investors are of the opinion that small ETF shops have the most closures.  However, it turns out that some of the largest sponsors are also the ones willing to shed unsuccessful or unwanted products.  They have learned that trimming the dead wood is key to long-term survival and success.  BlackRock iShares intends to liquidate and shutter 10 ETFs next month.  Their last trading day will be August 23, and at that time, iShares will have closed 66 ETFs, the most of any sponsor.  Invesco PowerShares has closed 59 funds, Guggenheim has shuttered 41, and many others are in double digits.  It would seem that closing an ETF would put you in good company.

Here is the Complete List of 490 ETFs and ETNs on ETF Deathwatch for July 2016  compiled using the objective ETF Deathwatch Criteria.

The 24 ETFs and ETNs added to ETF Deathwatch for July:

  1. AdvisorShares Madrona International (FWDI)
  2. AdvisorShares WCM/BNY Mellon Focused Growth ADR (AADR)
  3. Direxion Daily Healthcare Bear 3x (SICK)
  4. Direxion Daily S&P 500 Bull 2x (SPUU)
  5. Elkhorn FTSE RAFI U.S. Equity Income (ELKU)
  6. ETRACS Wells Fargo MLP Index ETN (MLPW)
  7. First Trust Hong Kong AlphaDEX (FHK)
  8. First Trust Indxx Global Natural Resources Income (FTRI)
  9. Guggenheim Dow Jones Industrial Avg Dividend (DJD)
  10. IQ 50 Percent Hedged FTSE Japan (HFXJ)
  11. iShares Edge MSCI Min Vol EM Currency Hedged (HEMV)
  12. iShares MSCI China Small-Cap (ECNS)
  13. Legg Mason Developed ex-US Diversified Core (DDBI)
  14. Legg Mason Emerging Markets Diversified Core (EDBI)
  15. Legg Mason US Diversified Core (UDBI)
  16. Pacer Autopilot Hedged European (PAEU)
  17. ProShares S&P 500 Ex-Energy (SPXE)
  18. ProShares Short Basic Materials (SBM)
  19. QuantShares U.S. Market Neutral Momentum (MOM)
  20. SPDR Barclays International High Yield Bond (IJNK)
  21. SPDR S&P 500 Buyback (SPYB)
  22. Tierra XP Latin America Real Estate (LARE)
  23. VanEck Vectors Poland (PLND)
  24. Victory CEMP US Small Cap Volatility Weighted (CSA)

The 3 ETPs removed from ETF Deathwatch due to improved health:

  1. iShares Enhanced U.S. Small-Cap (EMGF)
  2. John Hancock Multifactor Mid Cap (JHMM)
  3. ProShares Ultra Gold Miners (GDXX)

The 3 ETFs removed from ETF Deathwatch due to delisting:

  1. CS X-Links Merger Arbitrage ETN (CSMA)
  2. Barclays OFI SteelPath MLP ETN (OSMS)
  3. ALPS Enhanced Put Write Strategy (PUTX)

ETF Deathwatch Archives

Disclosure:  Author has no positions in any of the securities mentioned and no positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) is received from, or on behalf of, any of the companies or ETF sponsors mentioned.

- Print This Page Print This Page

Monday, July 25th, 2016

ETF Stats for June 2016: More Teeter-Totter Failures

By Ron Rowland
17:00 pm CDT

Thirty-two new ETFs and ETNs came to market in June, and three closed up shop.  The net increase of 29 puts the listed count at 1,931 (1,729 ETFs and 202 ETNs) at the end of June.  Assets climbed by $30.6 billion, with $19.3 billion coming from inflows and $11.2 billion the result of market action.  Overall assets of U.S.-listed ETFs and ETNs now stand at $2.25 trillion.

The most dubious new offering of the month was the rollout of another teeter-totter fund pair from a firm with a misleading name.  The AccuShares product line is anything but accurate, and it illustrates that the sponsors of teeter-totter products themselves do not understand how these function in real-world trading.  This lack of understanding apparently carries over to regulators who approve them and the financial media who laud them.

The latest disasters in this space are called the AccuShares S&P GSCI Crude Oil Excess Return Up Shares (OILU) and AccuShares S&P GSCI Crude Oil Excess Return Down Shares (OILD).  Launched in June, these products do not own anything—they are offsetting paired shares that simply hold cash.  In theory, when crude oil moves up, the net asset value (“NAV”) of OILU goes up, and the NAV of OILD goes down.  However, investors cannot buy and sell at the NAV, and the market price is unlinked from the NAV more than 95% of the time.

These products defy nearly every attribute that ETF investors hold dear, namely:

  • Demand-driven share creation: New teeter-totter shares can only be created in offsetting pairs, which destroys any notion of being demand-driven.  If rising crude-oil prices increases the demand for OILU, then new shares of OILU can only be created if an equal number of undesirable OILD shares are also created.
  • Ability to arbitrate the price to NAV: The offsetting pair creation-and-redemption mechanism hinders (perhaps prevents is a better word) the ability of market makers to arbitrate the market price to the underlying NAV.  Huge discounts and premiums are the norm.
  • Pass-through vehicles: Unlike the thousands of mutual funds and ETFs that have been introduced the past 80-plus years, OILU and OILD are not pass-through vehicles.  Instead, they are taxed as C-corporations, meaning 35% of taxable gains are an added expense to the fund before shareholders pay taxes on their profits.
  • Commodity exposure without distributions: Crude oil does not pay dividends, and investors desiring exposure to crude-oil prices do not expect monthly distributions.  However, these products make monthly distributions.  Although they are return-of-capital instead of a dividend, the day these once-a-month distributions are made is the one day a month that the share price can potentially be close to the NAV.  There is no such hope on the other 20 trading days (95%) of a typical month.
  • Distributions independent from exposure: Soon after AccuShares launched its VIX pairs, it realized these return-of-capital distributions not only reduced each investor’s basis, but they also drained assets from the funds.  To prevent the asset depletion, AccuShares started making distributions of offsetting shares.  Owners of Up shares now receive distributions of Down shares and vice versa.
  • Performance tracking: Not only do the prices not track the NAV, but the performance of a given product is impossible to determine given the frequency, amounts, and types of distributions.  AccuShares does not provide any performance data on its funds.

Paired-share teeter-totter funds have all been failures, and in my opinion, they are a blight on the ETF industry.  These failures include the following:

Another interesting industry event took place recently when AdvisorShares fired TrimTabs as the manager (subadvisor) of the AdvisorShares TrimTabs Float Shrink ETF (TTFS).  Independent advisors work with AdvisorShares to jointly launch new products.  Advisors associated with these ETFs have invested a great deal of time, effort, and cash.  Additionally, it appears they absorb much of the costs involved with capping the expense ratio whenever the ETFs are not generating enough revenue to cover ongoing expenses.

When these ETFs fail to attract enough revenue to cover costs, one of three things typically happens: (1) the subadvisor decides to grin and bear it while continuing to absorb the expense, (2) a decision is made to close and liquidate the fund, or (3) AdvisorShares and the subadvisor mutually agree to bring in a different subadvisor.  To my knowledge, this is the first time that AdvisorShares has unilaterally fired a subadvisor.  It’s even more surprising because the AdvisorShares TrimTabs Float Shrink ETF (TTFS) was one of the most successful ETFs ever launched by AdvisorShares.  At the time of the announcement, its $178 million in assets was the fourth largest of the 29 ETFs that AdvisorShares has brought to market.  Of the others, eight have already been closed and 10 are on ETF Deathwatch.

According to the AdvisorShares press release, TrimTabs was replaced by Wilshire Associates as the manager, and the name of the fund was changed to the AdvisorShares Wilshire Buyback ETF (TTFS) effective July 1.  According to the TrimTabs Asset Management press release, this move is not only surprising but baffling given the strong performance and financial success.  Investors should be keeping their eye out for a new ETF from TrimTabs later this year to replace TTFS.  Meanwhile, any investment advisor considering working with AdvisorShares on bringing an ETF to market should take this as a warning.

June 2016 Month EndETFsETNsTotal
Currently Listed U.S.1,7292021,931
Listed as of 12/31/20151,6442011,845
New Introductions for Month31132
Delistings/Closures for Month123
Net Change for Month+30-1+29
New Introductions 6 Months1168124
New Introductions YTD1168124
Delistings/Closures YTD31738
Net Change YTD+85+1+86
Assets Under Management$2,229 B$23.8 B$2,252 B
% Change in Assets for Month+1.4%+2.1%+1.4%
% Change in Assets YTD+6.3%+11.1%+6.3%
Qty AUM > $10 Billion55055
Qty AUM > $1 Billion2615266
Qty AUM > $100 Million80336839
% with AUM > $100 Million46.4%17.8%43.5%
AUM Flows for Month $19.30 B$0.20 B$19.32 B
AUM Flows YTD $73.21 B$1.51 B$74.72 B
Monthly $ Volume $1,798 B$85.1 B$1,883 B
% Change in Monthly $ Volume+29.9%+35.3%+30.2%
Avg Daily $ Volume > $1 Billion11213
Avg Daily $ Volume > $100 Million1006106
Avg Daily $ Volume > $10 Million31411325
Actively Managed ETF Count (w/ change)149+4 mth+12 ytd
Actively Managed AUM $26.4 B+3.8% mth+15.0% ytd
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 June (sorted by launch date):

  1. SPDR Dorsey Wright Fixed Income Allocation ETF (DWFI), launched 6/2/16, is a fund-of-funds ETF that uses price momentum to select ETFs targeting fixed-income securities.  The selection universe is limited to other SPDR ETFs and includes those providing exposure to U.S. and foreign developed and emerging-market bonds; Treasury bonds; corporate bonds; high-yield bonds; inflation-protected bonds; floating-rate notes; first-lien, senior-secured, floating-rate bank loans; preferred securities; U.S. municipal bonds; and U.S. convertible securities.  DWFI has an expense ratio of 0.60% (DWFI overview).
  2. Franklin LibertyQ Emerging Markets ETF (FLQE), launched 6/3/16, seeks to track an index of stocks from emerging-market countries with favorable exposure to quality, value, momentum, and volatility factors.  Its expense ratio is capped at 0.55% (FLQE overview).
  3. Franklin LibertyQ Global Dividend ETF (FLQD), launched 6/3/16, seeks to track an index of stocks from developed- and emerging-market countries with high and persistent dividend income along with favorable exposure to the quality investment-style factor.  FLQD will cap its expense ratio at 0.45% (FLQD overview).
  4. Franklin LibertyQ Global Equity ETF (FLQG), launched 6/3/16, seeks to track an index of stocks from developed and emerging markets that have favorable exposure to quality, value, momentum, and volatility factors.  The ETF caps its expense ratio at 0.35% (FLQG overview).
  5. Franklin LibertyQ International Equity Hedged ETF (FLQH), launched 6/3/16, seeks to track an index of stocks from developed markets, excluding the U.S. and Canada, with favorable exposure to quality, value, momentum, and volatility factors.  The ETF hedges foreign currency exposure and caps its expense ratio at 0.40% (FLQH overview).
  6. The Health and Fitness ETF (FITS), launched 6/7/16, is a thematic ETF offering from Janus.  The underlying index from Solactive seeks exposure to companies globally that are poised to take advantage of the growing trend toward health and fitness consumption, including companies whose business is focused on fitness technology and equipment, sports apparel, nutrition, and sports/fitness facilities.  The ETF uses a multi-tier, equal-weighting methodology, and its expense ratio is 0.50% (FITS overview).
  7. The Long-Term Care ETF (OLD), launched 6/7/16, is a thematic ETF offering from Janus.  The underlying index from Solactive seeks exposure to companies globally that are positioned to profit from providing long-term care to the aging population.  This includes companies owning or operating senior living facilities, nursing services, specialty hospitals, senior housing, biotech companies for age-related illnesses, and companies that sell products and services to such facilities.  OLD uses a multi-tier, equal-weighting methodology and has an expense ratio of 0.50% (OLD overview).
  8. The Obesity ETF (SLIM), launched 6/7/16, is a thematic ETF offering from Janus.  The underlying index from Solactive seeks exposure to companies globally that could benefit as they fight the global obesity epidemic.  These include biotechnology, pharmaceutical, health care, and medical device companies whose business is focused on obesity; obesity-related disease, including diabetes, high blood pressure, high cholesterol, heart disease, stroke, sleep apnea; weight loss programs; supplements; and plus-sized apparel.  The ETF uses a multi-tier, equal-weighting methodology with an expense ratio of 0.50% (SLIM overview).
  9. The Organics ETF (ORG), launched 6/7/16, is a thematic ETF offering from Janus.  The underlying index from Solactive seeks exposure to companies globally that can capitalize on the increasing desire for naturally derived food and personal-care items, including companies which service, produce, distribute, market, or sell organic food, beverage, cosmetics, supplements, or packaging.  ORG uses a multi-tier, equal-weighting methodology, and its expense ratio is 0.50% (ORG overview).
  10. RiverFront Dynamic US Dividend Advantage ETF (RFDA), launched 6/7/16, is an actively managed ETF seeking to provide capital appreciation and dividend income.  RiverFront Investment Group, LLC, assembles a portfolio of eligible securities based on several core attributes such as value, quality, and momentum.  It also considers multiple proprietary factors within each core attribute.  The ETF has an expense ratio of 0.52% (RFDA overview).
  11. RiverFront Dynamic US Flex-Cap ETF (RFFC), launched 6/7/16, is an actively managed ETF seeking to provide capital appreciation.  RiverFront assembles a portfolio of eligible securities based on several core attributes such as value, quality, and momentum.  The manager also considers multiple proprietary factors within each core attribute, and the ETF has an expense ratio of 0.52% (RFFC overview).
  12. Direxion Daily S&P 500 Bear 1x Shares (SPDN), launched 6/8/16, seeks daily investment results, before fees and expenses, that are 100% of the inverse (opposite) of the performance of the S&P 500 Index.  The portfolio is implemented with swaps, and the expense ratio is capped at 0.45% (SPDN overview).
  13. Aptus Behavioral Momentum ETF (BEMO), launched 6/9/16, seeks to track an index of 25 equal-weighted, large, U.S.-traded equity securities.  The proprietary index methodology, developed by Aptus Capital Advisors, quantitatively ranks large U.S. companies based on a combination of momentum and irrational investor behavior and seeks to gain exposure to only the highest ranked stocks.  The ETF has an added objective of capital protection during market downtrends and is therefore risk managed in that it can vary between 100% long-only exposure to stocks or 100% exposure to intermediate Treasury bonds dependent on the overall market environment.  BEMO has an expense ratio of 0.79% (BEMO overview).
  14. Columbia Sustainable Global Equity Income ETF (ESGW), launched 6/13/16, seeks to provide exposure to U.S. and foreign developed market large- and mid-cap companies believed to offer sustainable levels of income as well as total return opportunity.  The underlying index applies a systematic, rules-based multi-factor model and screens companies based on environmental, social, and governance practices.  Its expense ratio is 0.40% (ESGW overview).
  15. Columbia Sustainable International Equity Income ETF (ESGN), launched 6/13/16, seeks to provide exposure to foreign developed market large- and mid-cap companies believed to offer competitive and sustainable levels of income, as well as competitive total return.  The underlying index applies a systematic, rules-based, multi-factor model and screens companies based on environmental, social, and governance practices.  ESGN has an expense ratio of 0.45% (ESGN overview).
  16. Columbia Sustainable U.S. Equity Income ETF (ESGS), launched 6/13/16, seeks to provide exposure to U.S. large- and mid-cap companies believed to offer sustainable levels of income, as well as total return opportunity.  The underlying index applies a systematic, rules-based, multi-factor model and screens companies based on environmental, social, and governance practices.  The new ETF has an expense ratio of 0.35% (ESGS overview).
  17. RiverFront Dynamic Core Income ETF (RFCI), launched 6/14/16, is an actively managed ETF seeking total return with an emphasis on income as the source of that total return.  The global bond portfolio is constructed using a two-step process, with the first step setting the allocation among different fixed-income asset classes and the second step determining security selection within those asset classes.  RFCI has an expense ratio of 0.51% (RFCI overview).
  18. RiverFront Dynamic Unconstrained Income ETF (RFUN), launched 6/14/16, is an actively managed ETF seeking total return with an emphasis on income as the source of that total return.  The global bond portfolio is constructed using a two-step process, with the first step setting the allocation among different fixed-income asset classes and the second step determining security selection within those asset classes.  A quantitative methodology determines the allocations’ various maturities of investment-grade securities, high-yield securities, and emerging-market debt.  RFUN has an expense ratio of 0.51% (RFUN overview).
  19. First Trust RiverFront Dynamic Emerging Markets ETF (RFEM), launched 6/15/16, is an actively managed ETF seeking to provide capital appreciation of emerging-market equities along with a dynamic currency-hedging strategy that can hedge anywhere from 0%–100% of the fund’s currency exposure.  A quantitative matrix screen scores geographies on fundamental and technical momentum and combines this with a qualitative assessment seeking to identify meaningful changes in fundamentals.  The portfolio managers combine the outputs of their quantitative and qualitative processes with their view on valuation, relative to these outputs.  The expense ratio comes in at 0.95% (RFEM overview).
  20. iShares MSCI China A ETF (CNYA), launched 6/15/16, seeks to track the investment results of an index composed of domestic Chinese equities known as A-shares that trade on the Shanghai or Shenzhen Stock Exchange.  Holdings are capitalization-weighted, and the fund has an expense ratio of 0.65% (CNYA overview).
  21. Direxion Daily High Yield Bear 2x Shares (HYDD), launched 6/16/16, seeks daily investment results that are 200% of the inverse (opposite) of the performance of the Barclays U.S. High Yield Very Liquid Index.  The portfolio is implemented with swaps on the SPDR Barclays High Yield Bond ETF (JNK) and comes with an expense ratio of 0.80% (HYDD overview).
  22. iShares Fallen Angels USD Bond ETF (FALN), launched 6/16/16, seeks to track the Barclays US High Yield Fallen Angel 3% Capped Index, which is designed to reflect the performance of U.S. dollar denominated, high-yield corporate bonds that were previously rated investment grade.  Bonds are market-value-weighted with a 3% cap on each issuer, and the ETF carries an expense ratio of 0.35% (FALN overview).
  23. iShares iBoxx $ High Yield ex Oil & Gas Corporate Bond ETF (HYXE), launched 6/16/16, seeks to track the investment results of an index composed of a broad range of U.S. dollar–denominated, high-yield corporate bonds that excludes those issued by companies in the oil and gas sector.  HYXE has an expense ratio of 0.50% (HYXE overview).
  24. AccuShares S&P GSCI Crude Oil Excess Return Down Shares (OILD), is a product that is taxed as a C-corporation and seeks to track the inverse performance of the S&P GSCI Crude Oil Index just once per month.  The product does not own anything and is combined with the Up Shares (OILU) in what is known as a teeter-totter arrangement.  AccuShares attached numerous warnings to OILD, including that the fund will only seek to match the inverse performance of the Index once per month (between distribution dates), that it will be subject to large price premiums and discounts the remainder of the month, and that it should be considered a short-term investment.  Additionally, the fund may make large return-of-capital distributions on a monthly basis, the fund will often make distributions of offsetting paired shares, and new shares will only be issued in offsetting pairs.  To maintain your original correlation to the underlying Index when receiving a distribution of offsetting shares, you will have to sell the shares of the opposite class, and this will impede the ability of your investment to track the performance of the underlying Index.  The fund is expected to be treated as a C-corporation for income-tax purposes, and the various federal, state, and local taxes will be accrued daily, reducing the fund’s value.  This product claims to have an expense ratio of 0.29%, but that does not include its tax liabilities (OILD overview).
  25. AccuShares S&P GSCI Crude Oil Excess Return Up Shares (OILU), launched 6/28/16, is a product that is taxed as a C-corporation and seeks to track the S&P GSCI Crude Oil Index just one day per month.  The product does not own anything and is combined with the Down Shares (OILD) in what is known as a teeter-totter arrangement.  The product comes with numerous warnings, which are outlined above in the OILD description.  OILU claims to have an expense ratio of 0.29%, but that does not include its tax liabilities (OILU overview).
  26. Deutsche X-trackers Russell 2000 Comprehensive Factor ETF (DESC), launched 6/28/16, is an index-based fund designed to capture exposure to small-cap U.S. equities based on quality, value, momentum, low volatility, and size.  These factors represent common stock characteristics, for which there is a broad academic consensus, that explain a stock’s risk and performance.  DESC has an expense ratio of 0.30% (DESC overview).
  27. RBC S&P 500 Trend Allocator PR Index ETN (TALL), launched 6/28/16, are exchange-traded notes (“ETNs”) issued by the Royal Bank of Canada that are linked to the return of the S&P 500 Trend Allocator PR Index.  The underlying Index will track the S&P 500 Total Return Index if it has been above its 200-day moving average for five consecutive days.  If the S&P 500 Total Return Index is below its 200-day moving average for five consecutive days, then the underlying Index will track the cash rate.  The TALL ETN has an investor fee (expense ratio) of 0.85% (TALL overview).
  28. SPDR S&P Internet ETF (XWEB), launched 6/28/16, intends to track the internet segment of the S&P Total Market Index, which comprises the internet retail subindustry and internet software & services subindustry.  XWEB uses an equal-weighting scheme and carries an expense ratio of 0.35% (XWEB overview).
  29. SPDR S&P Technology Hardware ETF (XTH), launched 6/28/16, seeks to track the performance of the technology hardware segment of the S&P Total Market Index, which comprises the technology hardware, storage & peripherals subindustry; electronic equipment & instruments subindustry; and electronic components subindustry.  XTH employs an equal-weighting methodology and comes with an expense ratio of 0.35% (XTH overview).
  30. Guggenheim S&P 100 Equal Weight ETF (OEW), launched 6/30/16, owns the 100 mega-cap stocks of the S&P 100 Index using an equal-weighting approach.  The new ETF has an expense ratio of 0.40% (OEW overview).
  31. iShares MSCI EAFE ESG Select ETF (ESGD), launched 6/30/16, seeks to track the investment results of an index composed of large- and mid-capitalization developed-market equities, excluding the U.S. and Canada, that have positive environmental, social, and governance characteristics at an expense ratio of 0.40% (ESGD overview).
  32. iShares MSCI EM ESG Select ETF (ESGE), launched 6/30/16, seeks to track the investment results of an index composed of large- and mid-capitalization emerging-market equities that have positive environmental, social, and governance characteristics.  ESGE has an expense ratio of 0.45% (ESGE overview).

Product closures in June and last day of listing:

  1. CS X-Links Merger Arbitrage ETN (CSMA) 6/10/16
  2. Barclays OFI SteelPath MLP ETN (OSMS) 6/21/16
  3. ALPS Enhanced Put Write Strategy (PUTX) 6/24/16

Product changes in June:

  1. Franklin Short Duration U.S. Government ETF (FTSD) was renamed the Franklin Liberty Short Duration U.S. Government ETF (FTSD) effective June 1.
  2. KraneShares CSI New China ETF (KFYP) was renamed KraneShares Zacks New China ETF (KFYP) effective June 1.
  3. AccuShares Spot CBOE VIX Up Shares (VXUP) and AccuShares Spot CBOE VIX Down Shares (VXDN) effected 1-for-3 reverse splits on June 23.
  4. ProShares Short S&P 500 (SH) underwent a 1-for-2 reverse split effective June 24.
  5. VanEck Vectors High Income MLP ETF (YMLP) underwent a 1-for-5 reverse split effective June 29.

Announced product changes for coming months:

  1. AdvisorShares TrimTabs Float Shrink ETF (TTFS) will change its subadvisor and be renamed the AdvisorShares Wilshire Buyback ETF (TTFS) effective July 1 (TrimTabs’ response).
  2. Effective on or after July 1, 2016, iShares will change from Barclays to ICE U.S. Treasury Bond Index Series indexes for iShares Core U.S. Treasury Bond ETF (GOVT), iShares Short Treasury Bond ETF (SHV), and iShares 10-20 Year Treasury Bond ETF (TLH).
  3. Falah Russell-IdealRatings U.S. Large Cape ETF (FIA) will close and liquidate with July 14 being its last day of listed trading.
  4. Direxion Daily Total Market Bear 1x Shares (TOTS) will close and liquidate with July 15 being its last day of trading.
  5. The SPDR Quality Mix suite of 13 ETFs will be rebranded as the SPDR StrategicFactors suite effective July 15.
  6. AccuShares Spot CBOE VIX Down Shares (VXDN) will receive a regular distribution payable in shares of VXUP and VXDN, and a corrective distribution of payable in shares of VXUP effective July 20.
  7. AccuShares Spot CBOE VIX Up Shares (VXUP) will receive a corrective distribution payable in shares of VXDN effective July 20.
  8. BlackRock iShares will perform forward splits on 11 of its ETFs (ITOT, IUSG, IUSV, IUSB, ISTB, IBCC, IBCD, IBCE, IBDB, IBDC, and IBDD) effective July 22.
  9. ProShares will effect ETF splits on July 22.  UGE, UPW, CMD, UXI, and KOLD will undergo forward splits, and GDXS, VIXY, and UVXY will undergo reverse splits.
  10. BlackRock plans to close and liquidate 10 iShares ETFs.  August 23 will be the last day of listed trading for EEML, EMHZ, IEIL, IELG, IEIS, IESM, ITIP, GTIP, QLTB, and QLTC.
  11. The iShares iBonds Sep 2016 Term Muni Bond ETF (IBME) is scheduled to mature and will cease trading at the market’s close on September 1, 2016.

Previous monthly ETF statistics reports are available here.

Disclosure: Author has no positions in any of the securities, companies, or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) is received from, or on behalf of, any of the companies or ETF sponsors mentioned.

- Print This Page Print This Page

Tuesday, July 19th, 2016

600 ETFs Now Shuttered

By Ron Rowland
8:32 am CDT

The ETF world crossed another major milestone with the delisting of Direxion Daily Total Market Bear 1x Shares (TOTS) before the market opened yesterday (7/18/16).  By itself, the closure of this ETF is not a remarkable event, but in conjunction with the 599 closures that came before it, the TOTS closure brings the lifetime death toll of U.S.-listed ETFs and ETNs to 600.

May 2009 is when the industry reached its first 100-closure milestone.  Since then, each successive round-number increment has occurred on a regular basis, with the other 100-closure milestones taking place in December 2011 (200), October 2012 (300), March 2014 (400), and we crossed the 500 threshold in May 2015.

With a total of nearly 2,540 ETFs and ETNs brought to market in the U.S, these 600 closures represent a mortality rate of 23.6%.  Additionally, 472 products were on ETF Deathwatch for June, and the smallest 1,044 of the 1,931 listings (54%) at the end of June account for only 1% of all ETF assets.  They are clearly not profitable for their sponsors.  Many of these will also not survive, and getting to the 1,000 ETF closure milestone is only a matter of time.

Disclosure covering writer:  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.

- Print This Page Print This Page

Read More Commentary Here>>>>

Free Special Report

With interest rates near zero, how can you generate income with your nest egg? Our free special report shows you how. cover art
You will also receive our weekly market commentary and unique analysis based on our Edge Charts. Privacy

The Market Today

Subscribe to Commentary

Sign up HERE to get breaking news from Invest With An Edge & other updates.