Wednesday, April 23rd, 2014

BXDB: Barclays Short Leveraged ETN+ Triggers Early Termination

By Ron Rowland
8:43 am CDT

Its official name was Barclays ETN+ Short B Leveraged Exchange Traded Notes Linked to the Performance of the S&P 500 Total Return Index (BXDB).  What the name didn’t tell you was the magnitude of the leverage, that the leverage was never reset, and early termination was practically inevitable.  However, these items were highlighted in my initial analysis when the product was launched in 2009.

On April 4, 2014 BXDB’s indicative value dropped below $10, triggering an early termination stop loss.  Barclays issued a press release that day announcing the early termination and declared the ETNs would have a redemption value of $10.00 on April 11.  However, BXDB would not halt trading until its delisting after the market close on April 10.

Nearly five days of trading took place between the freezing of the liquidation value at $10.00 and the actual redemption.  Market regulators do not require sponsors or exchanges to warn potential investors about broken products, and unwitting investors paid as much as $10.20 and sold for as low as $9.90 during the interim.

Unless special mechanisms like early termination triggers are used, “no-reset” ETPs have the potential of their value going below zero.  Therefore, products like BXDB include stop-loss provisions and other means of triggering an early redemption.  Of the five ETNs Barclays launched in this series, only the two “long” products remain.

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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Wednesday, April 16th, 2014

ETF Deathwatch for April 2014: Membership Count Drops Below 300

By Ron Rowland
10:33 am CDT

ETF Deathwatch membership rolls dropped by 15 for April, and for the first time in 25 months the list contains fewer than 300 products.  Five names joined the list, eight came off due to improved health, and a dozen exited because they are no longer with us.  The ETF Deathwatch for April contains 299 products, consisting of 201 ETFs and 98 ETNs.  Among the ETFs on the list, 16 are categorized as actively managed funds.

Unlike March, when a large percentage of ETPs joining the list had similar objectives, the five new additions for April all have different objectives.  Products targeting emerging markets infrastructure, US REITs, precious metals, inverse TIPS, and large cap stocks equally weighted by risk comprise the new members.  These are not overly crowded categories, and the latter two are quite unique, so it does not appear to be an over-supply issue.

Half of the products coming off because of improved health are part of the PowerShares DB family of single country bond futures ETNs.  Assets across these four ETNs jumped more than 300% in March, from less than $50 million to more than $200 million.  It’s probably safe to say an institutional investor has added these ETNs to their investment arsenal.

One of the primary purposes of ETF Deathwatch is to warn investors of potential closures.  Of the thirteen ETF closures in March, twelve were on the list, implying that ETF Deathwatch is performing its duty.  The one closure not identified as being in danger is somewhat of a mystery.  The moderately successful Pax MSCI EAFE ESG Index ETF (EAPS) had more than $50 million in assets when Pax World announced the fund’s fate back in January.  However, EAPS was far from a typical closure.  Instead of shutting down and liquidating, it converted to an old fashion open-end mutual fund.

The average age of products on Deathwatch increased from 41.6 to 42.5 months with 76 of them more than five years old.  The average asset size increased from $6.8 million to $7.2 million, and 47 products have less than $2 million in assets.  Eight ETPs went the entire month of March with zero volume, and 177 (11%) saw no action on the last day of the month.

Here is the Complete List of 299 Products on ETF Deathwatch for April 2014 compiled using the objective ETF Deathwatch Criteria.

The 5 ETPs added to ETF Deathwatch for April:

  1. EGShares India Infrastructure (INXX)
  2. Guggenheim Wilshire US REIT (WREI)
  3. iPath DJ-UBS Precious Metals ETN (JJP)
  4. ProShares UltraShort TIPS (TPS)
  5. VelocityShares Equal Risk Weighted LargeCap (ERW)

The 8 ETPs removed from ETF Deathwatch due to improved health:

  1. Columbia Select Large Cap Growth (RWG)
  2. Credit Suisse Commodity Rotation ETN (CSCR)
  3. iPath DJ-UBS Softs ETN (JJS)
  4. iShares MSCI Emerging Markets EMEA (EEME)
  5. PowerShares DB 3x German Bund Futures ETN (BUNT)
  6. PowerShares DB 3x Italian T-Bond Futures ETN (ITLT)
  7. PowerShares DB German Bund Futures ETN (BUNL)
  8. PowerShares DB Italian T-Bond Futures ETN (ITLY)

The 12 ETPs removed from ETF Deathwatch due to delisting:

  1. Guggenheim Enhanced Core Bond (GIY)
  2. PIMCO Broad U.S. Treasury Index (TRSY)
  3. iShares MSCI ACWI ex US Consumer Discretionary (AXDI)
  4. iShares MSCI ACWI ex US Consumer Staples (AXSL)
  5. iShares MSCI ACWI ex US Energy (AXEN)
  6. iShares MSCI ACWI ex US Financials (AXFN)
  7. iShares MSCI ACWI ex US Healthcare (AXHE)
  8. iShares MSCI ACWI ex US Industrials (AXID)
  9. iShares MSCI ACWI ex US Information Technology (AXIT)
  10. iShares MSCI ACWI ex US Materials (AXMT)
  11. iShares MSCI ACWI ex US Telecom Services (AXTE)
  12. iShares MSCI ACWI ex US Utilities (AXUT)

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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Thursday, April 10th, 2014

ETF Stats for March 2014 – First ETF Conversion to Mutual Fund

By Ron Rowland
14:06 pm CDT

March was the only month of the past twelve that failed to produce a net increase in the number of ETP listings.  A dozen new ETFs and one ETN came to market, but those figures were offset by thirteen ETF closures.  The net change of zero leaves the overall count at 1,568 (consisting of 1,365 ETFs and 203 ETNs).  The actively managed fund count also held steady at 85 with one new introduction and one closure.

One of the more interesting events occurring during the month was the conversion of an ETF to an old fashion open-end mutual fund.  To our knowledge, this is a first for the U.S. ETF industry and probably caught some shareholders off-guard.  March 21 was the last day of trading for the Pax MSCI EAFE ESG Index ETF (EAPS).  Ten days later, shareholder statements were showing a different holding – the Pax World International ESG Index Fund (PXNIX), a newly formed mutual fund that reused an existing ticker symbol while keeping the track record of EAPS.  There have been many forecasts and predictions about the ETF industry, but this is one thing that wasn’t supposed to happen.

ETP assets grew by 0.8% in March and now total $1.74 trillion.  The number of products exceeding $1 billion shrunk by one to 225, and they account for 88.4% of all ETP assets.  Funds with more than $10 billion now number 38, and while that represents just 2.4% of listings, they account for the majority (53.7%) of assets.  The 782 smallest products add up to only 1% of industry assets.

March trading activity increased 8.6% over the February level, reaching $1.55 trillion.  This falls short of industry asset levels, resulting in a 89% turnover rate for the month.  As usual, the SPDR S&P 500 ETF (SPY) grabbed the lion’s share, accounting for 30.7% of all ETP dollar volume for the month.

March 2014 Month EndETFsETNsTotal
Currently Listed U.S.1,3652031,568
Listed as of 12/31/20131,3322041,536
New Introductions for Month12113
Delistings/Closures for Month13013
Net Change for Month-1+10
New Introductions 6 Months1005105
New Introductions YTD52153
Delistings/Closures YTD19221
Net Change YTD+33-1+32
Actively-Managed Listings85 (+1-1) n/a85 (+1-1)
Assets Under Mgmt ($ billion)$1,717$25.7$1,748
% Change in Assets for Month+0.8%+4.2%+0.8%
Qty AUM > $10 Billion38038
Qty AUM > $1 Billion2178225
Qty AUM > $100 Million69733730
% with AUM > $100 Million51.1%16.3%46.6%
Monthly $ Volume ($ billion)$1,498$50.4$1,549
% Change in Monthly $ Volume+9.4%-7.4%+8.6%
Avg Daily $ Volume > $1 Billion10111
Avg Daily $ Volume > $100 Million84286
Avg Daily $ Volume > $10 Million26210272
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 March (sorted by launch date):

  1. Horizons Korea KOSPI 200 ETF (HKOR), launched 3/4/14, will invest in the KOSPI 200 Index, which is a market capitalization weighted index comprised of 200 blue chip companies listed on the Korea Exchange.  Investors should be aware that nearly 22% of the fund is invested in Samsung Electronics.  With the exception of Hyundai Motor at 5.7%, the remaining constituents are under 5%.  The fund has an expense ratio of 0.38% (HKOR overview).
  2. AdvisorShares YieldPro ETF (YPRO), launched 3/5/14, is an actively managed fund-of-funds that will allocate the majority of the portfolio to long and short positions across all segments of the “fixed income” market.  Current holdings include MLPs and REITs.  The fund has the capability to hedge against what it sees as unfavorable conditions in certain segments of the bond market.  No yield information is provided.  The expense ratio is a bit on the high side for an ETF at 1.42% (YPRO overview).
  3. KraneShares Bosera MSCI China A ETF (KBA), launched 3/5/14, is part of the recent influx of fund companies taking advantage of the easing of restrictions by the Chinese government for foreigners to invest directly in Chinese companies.  The underlying index is the MSCI China A Index, providing comprehensive coverage of large, mid and small cap segments, while holding about 450 securities.  Investors will pay 1.1% annually to own this fund (KBA overview).
  4. First Trust Dorsey Wright Focus 5 ETF (FV), launched 3/6/14, is a fund-of-funds ETF managed by First Trust (“FT”) that invests in other ETFs from FT.  The fund employs a relative strength sector rotation strategy designed to provide targeted exposure to the five industry and sector ETFs the underlying index believes offer the greatest potential to outperform.  Current holdings include FT NYSE Arca Biotechnology (FBT), FT Dow Jones Internet (FDN), FT Health Care AlphaDEX (FXH), FT Consumer Discretionary AlphaDEX (FXD), and FT Consumer Staples AlphaDEX (FXG).  The fund has an expense ratio of 0.95% (FV overview).
  5. First Trust RBA American Industrial Renaissance ETF (AIRR), launched 3/11/14, targets small and mid size companies in the industrial and community bank sectors.  Included companies must have U.S. sales of at least 75% and have positive 12-month forward earnings estimates.  Banks will be chosen from states considered to be traditional manufacturing hubs and will be limited to 10% of the portfolio.  The fund will charge investors 0.70% per year (AIRR overview).
  6. First Trust RBA Quality Income ETF (QINC), launched 3/11/14, will provide access to a diversified portfolio of income producing equity securities, no matter their size capitalization.  The universe starts with high-yielding, global securities, and then is screened for debt levels and consistency of earnings/cash flow in an effort to weed out those that might be under pressure to cut dividends.  QINC sports a 0.70% expense ratio (QINC overview).
  7. Global X Guru International Index ETF (GURI), launched 3/11/14, will track, excluding fees and expenses of course, the Solactive Guru International Index.  The index will follow quarterly regulatory filings from a select group of hedge funds and institutional investors and invest in their highest conviction U.S. listed international holdings.  Investors should expect quarterly adjustments to the holdings, which are equally weighted.  The ETF has a 0.75% expense ratio (GURI overview).
  8. Global X Guru Small Cap Index ETF (GURX), launched 3/11/14, will track, excluding fees and expenses, the Solactive Guru Small Cap Index.  It will follow quarterly regulatory filings from a select group of hedge funds and institutional investors and invest in their highest conviction U.S. listed small cap equities.  As with GURI, investors should expect quarterly holding changes, equally weighting, and a 0.75% expense ratio (GURX overview).
  9. Cambria Global Value ETF (GVAL), launched 3/12/14, will invest in a proprietary Cambria Index.  The methodology starts with a universe of 45 countries located in developed and emerging markets.  The GVAL portfolio invests in the 25% cheapest markets in the world based on Cambria’s proprietary long term valuation metrics.  A screen of over $200 million market capitalization is then applied, and the fund holds approximately 100 companies.  The U.S. allocation is limited to 10%, so we will classify the fund as international instead of global.  The fund will charge investors 0.69% per year (GVAL overview).
  10. SPDR Barclays International High Yield Bond ETF (IJNK), launched 3/13/14, will invest in high yield, fixed rate, fixed income corporate markets of non-U.S. issuers.  Securities held will have a minimum $350 million market capitalization in local currency terms and at least 1 year remaining to maturity.  The fund has a current yield of 6.4%, a modified adjusted duration of 3.6 years, and an expense ratio of 0.40% (IJNK overview).
  11. ETRACS Monthly Reset 2xLeveraged S&P 500 Total Return ETN (SPLX), launched 3/26/14, is an Exchange Traded Note (ETN) seeking to provide two times the performance of the S&P 500 Total Return Index with leverage reset monthly.  Because it tracks a total return index, investors will not receive dividends.  They will instead receive additional capital appreciation of about twice the S&P 500 yield.  Investors will spend 0.85% annually to own this unsecured, debt obligation (SPLX overview).
  12. ProShares DJ Brookfield Global Infrastructure ETF (TOLZ), launched 3/27/14, will invest in companies whose primary business is to own and operate infrastructure.  Companies focusing on services, such as engineering and construction, will be excluded.  TOLZ is expected to have an initial yield of 3.4% with the expense ratio capped through 9/30/15 at 0.45% (TOLZ overview).
  13. ALPS Emerging Sector Dividend Dogs ETF (EDOG), launched 3/28/14, seeks to provide high dividend exposure in each of the 10 GICS sectors using the equities in the S-Network Emerging Markets Index.  The fund invests across all 10 sectors by selecting the five highest yielding securities in each sector.  The fund will generally hold 50 stocks, equally weighted.  In addition, the country representation is capped at five securities.  The fund’s expense ratio is 0.60% (EDOG overview).

Product closures/delistings in March:

  1. Guggenheim Enhanced Core Bond (GIY) [A Brief History Of A Doomed ETF]
  2. PIMCO Broad U.S. Treasury Index (TRSY) [PIMCO Closing First ETF]
  3. Pax MSCI EAFE ESG Index ETF (EAPS) [This Wasn’t Suppose To Happen: ETF Converts to Mutual Fund]
  4. iShares MSCI ACWI ex US Consumer Discretionary (AXDI) [Another International Sector Suite Bites The Dust]
  5. iShares MSCI ACWI ex US Consumer Staples (AXSL)
  6. iShares MSCI ACWI ex US Energy (AXEN)
  7. iShares MSCI ACWI ex US Financials (AXFN)
  8. iShares MSCI ACWI ex US Healthcare (AXHE)
  9. iShares MSCI ACWI ex US Industrials (AXID)
  10. iShares MSCI ACWI ex US Information Technology (AXIT)
  11. iShares MSCI ACWI ex US Materials (AXMT)
  12. iShares MSCI ACWI ex US Telecom Services (AXTE)
  13. iShares MSCI ACWI ex US Utilities (AXUT)

Product changes in March:

  1. The iSharesBond Corporate ex-Financials Term and iSharesBond Corporate Term ETFs added ‘Mar’ in front of the maturity year to indicate their March maturity and termination effective March 3.
  2. Market Vectors Uranium+Nuclear Energy ETF (NLR) changed its underlying index from DAXglobal Nuclear Energy to Market Vectors Global Uranium and Nuclear Energy Index effective March 24.

Announced Product Changes for Coming Months:

  1. Jefferies | TR/J CRB Global Commodity Equity Index Fund (CRBQ), an ETF issued by ALPS, will change its name to Global Commodity Equity ETF (CRBQ) effective April 1.

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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Monday, March 31st, 2014

Another International Sector Suite Bites The Dust

By Ron Rowland
17:17 pm CDT

Sector ETFs are popular.  International sector ETFs, not so much.  In fact, successfully maintaining a foreign sector ETF suite has proven to be nearly impossible.  The latest casualty is the 10-ETF All Country excluding US Sector Suite launched by iShares in 2010.

As previously announced, March 25, 2014 was the last day of trading for:

  1. iShares MSCI ACWI ex US Consumer Discretionary (AXDI)
  2. iShares MSCI ACWI ex US Consumer Staples (AXSL)
  3. iShares MSCI ACWI ex US Energy (AXEN)
  4. iShares MSCI ACWI ex US Financials (AXFN)
  5. iShares MSCI ACWI ex US Healthcare (AXHE)
  6. iShares MSCI ACWI ex US Industrials (AXID)
  7. iShares MSCI ACWI ex US Information Technology (AXIT)
  8. iShares MSCI ACWI ex US Materials (AXMT)
  9. iShares MSCI ACWI ex US Telecom Services (AXTE)
  10. iShares MSCI ACWI ex US Utilities (AXUT)

The 10 closing funds had total assets of less than $54 million when BlackRock (BLK), the sponsor of iShares ETFs, announced its liquidation plans.  The iShares MSCI ACWI ex US Healthcare ETF (AXHE) was the most popular member of the set with investors, yet it had only about $12 million in assets.  These closures push the lifetime US ETP death toll above 400.

Other failed attempts with international sector suites include the March 2010 closure of WisdomTree’s International sector lineup and last year’s shuttering of the EGShares emerging market sector GEMS ETFs.  Now, with iShares abandoning the segment, the only way to get broad pure international sector exposure is via the SPDR S&P International Sector Suite.  The iShares Global Sector Suite, launched in 2001, is still alive and well, although its ‘global’ designation suggests that they average about 50% U.S. exposure.

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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