Tuesday, June 16th, 2015

ETF Deathwatch for June 2015: List Grows to 323

By Ron Rowland
20:02 pm CDT

The ETF Deathwatch membership roll grew eight names larger for June.  Seventeen products were added and nine came off.  Escapees included seven products with improved health and two that closed up shop.  The count now stands at 323, consisting of 225 ETFs and 98 ETNs.  Actively managed ETFs continue to have a disproportionally large representation with nearly half of the eligible funds showing up on the list.  Product deaths reached a major milestone last month, attaining the level of 500 closures.

Funds offering +/- 200% leveraged market exposure were extremely popular with day-traders and the high frequency trading crowd when they were introduced.  As noted in the past, these traders have been migrating toward the 300% leveraged funds for the extra “juice” they provide.  ProShares Ultra S&P Regional Banking (KRU) is an example of a 200% long product targeting an industry that has been performing quite well lately.  It is up more than twice as much as the broader and more leveraged Direxion Daily Financial Bull 3x Shares (FAS) over the past month.  Despite its much better performance, KRU is joining ETF Deathwatch this month, while FAS has more than $1 billion in assets and averaged $144 million in daily trading the past three months.  Today, 40 products using 200% leverage are on ETF Deathwatch versus only seven that use 300% leverage.

Smart beta seems to be a very popular theme in the ETF space these days, and it is difficult to go more than a few days without some article making reference to it.  However, it takes more than tagging an ETF as a “smart beta” product to ensure success.  FlexShares Credit-Scored US Corporate Bond (SKOR) and PowerShares DB Optimum Yield Diversified Commodity Strategy (PDBC), smart beta funds targeting bonds and commodities, respectively, were added to ETF Deathwatch this month.

The primary concern with any of these products is liquidity.  It is always prudent to have an exit plan before making your purchase, and this usually entails knowing what will prompt you to sell.  A key ingredient is having someone willing to buy your shares at a fair price when you are ready to sell.  There were 233 ETFs and ETNs that had zero volume on the last day of May.  More than 13% of all listed products did not trade that day.  Additionally, there were 21 funds that went the entire month without seeing any action.  Today, the iPath Long Extended Russell 1000 ETN (ROLA) is being quoted with a bid of $170.01 and an asking price of $276.34, creating a $106.33 spread.  Its last trade occurred on January 8, 2015.  Even if you could buy ROLA at a discount, who will buy your shares when you want to sell?

The average asset level of products on ETF Deathwatch decreased from $6.9 million to $6.8 million, and 49 currently have less than $2 million in assets.  The average age increased from 47.2 to 48.3 months, and 99 are now more than five years old.

Here is the Complete List of 323 Products on ETF Deathwatch for June 2015 compiled using the objective ETF Deathwatch Criteria.

The 17 ETPs added to ETF Deathwatch for June:

  1. C-Tracks Citi Volatility Index TR ETN (CVOL)
  2. ETRACS CMCI Gold TR ETN (UBG)
  3. ETRACS CMCI Livestock TR ETN (UBC)
  4. ETRACS Daily Long-Short VIX ETN (XVIX)
  5. Huntington US Equity Rotation Strategy (HUSE)
  6. iShares Industrials Bond (ENGN)
  7. ProShares CDS Short North America HY Credit (WYDE)
  8. ProShares Global Listed Private Equity (PEX)
  9. ProShares Ultra S&P Regional Banking (KRU)
  10. ProShares UltraShort MSCI EAFE (EFU)
  11. RBS China Trendpilot ETN (TCHI)
  12. WisdomTree Indian Rupee Strategy (ICN)
  13. First Trust Emerging Markets Local Bond ETF (FEMB)
  14. First Trust International IPO ETF (FPXI)
  15. First Trust Low Duration Mortgage Opportunities (LMBS)
  16. FlexShares Credit-Scored US Corporate Bond (SKOR)
  17. PowerShares DB Optimum Yield Diversified Commodity Strategy (PDBC)

The 7 ETPs removed from ETF Deathwatch due to improved health:

  1. ALPS STOXX Europe 600 ETF (STXX)
  2. DB 3x German Bund Futures ETN (BUNT)
  3. iShares Interest Rate Hedged Corporate Bond (LQDH)
  4. iShares MSCI Europe Minimum Volatility (EUMV)
  5. iShares MSCI Japan Minimum Volatility (JPMV)
  6. PowerShares S&P Intl Developed High Beta (IDHB)
  7. ProShares MSCI EAFE Dividend Growers (EFAD)

The 2 ETPs removed from ETF Deathwatch due to delisting:

  1. Deutsche X-trackers In-Target Date (TDX)
  2. Deutsche X-trackers 2010 Target Date (TDD)

ETF Deathwatch Archives

Disclosure covering writer:  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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Saturday, June 6th, 2015

ETF Stats for May 2015 – Spot Failures and Extreme Makeovers

By Ron Rowland
18:47 pm CDT

Sixteen new products were introduced in May and five were closed. Both the launch and closure counts should have been higher by ten, but Invesco PowerShares decided to perform an extreme-makeover on ten of its ETFs.  Additionally, new entrant AccuShares fails to learn from history and launches ETFs it claims will track spot prices.

The month of May ended with 1,714 active listings, consisting of 1,506 ETFs and 208 ETNs.  The quantity of actively managed ETFs held steady at 126.  Industry assets crept 0.6% higher, and the $2.1 trillion now being held in ETFs and ETNs represents a 7.2% increase since the year began.

Invesco PowerShares decided to change directions with ten ETFs in its lineup.  The firm fired Research Affiliates and removed the RAFI fundamental indexing from nine style-box ETFs.  Russell Equal Weight and Pure Style indexes replaced them.  Instead of closing the PowerShares Fundamental Pure Large Core Portfolio (PXLC) and launching the PowerShares Russell Top 200 Equal Weight Portfolio (EQWL), Invesco decided to merely transpose the fund from fundamental to equal weighting while changing its stock selection universe, name, ticker symbol, and objective.

The small and mid-cap PowerShares funds underwent similar changes.  The six ETFs with growth and value designations changed from RAFI Fundamental indexes to Russell Pure Style indexes but kept their same ticker symbols.  The tenth ETF underwent the most extreme transformation, as PowerShares NYSE Century Portfolio (NYCC) is now the PowerShares Dow Jones US Contrarian Opportunities Portfolio (CNTR).  For it, nothing is the same except for the PowerShares brand.  In all cases, the former performance history is now useless.

AccuShares Spot CBOE VIX Fund Up (VXUP) and AccuShares Spot CBOE VIX Fund Down (VXDN) were launched amid a heap of positive praise on May 19.  However, the performance of the two funds has not been anywhere near that of spot VIX.  They do not invest in the VIX, and they do not invest in VIX futures.  Instead, they sit in cash, with the NAVs moving against each other in a teeter-totter fashion.  In short, they smell just like MacroShares, those teeter-totter pairs that arrived with high praise but soon flamed out.

The underlying NAVs might be tracking VIX spot prices, but since the funds do not have a valid and functioning creation/redemption mechanism, trading prices have been subject to extreme premiums and discounts, just like closed-end funds.  There is no way to arbitrage the trading price to NAV on a daily basis, but fund literature claims it may happen once a month when they make a distribution.  Another problem is that the “Up shares” and “Down shares” can only be issued in tandem, even though their supply and demand will hardly ever be identical. The funds are seeing some trading action, but it is probably futures traders trying to arbitrage the price to VIX futures.  These funds do not track spot prices.  So far, they are tracking VIX futures.

May 2015 Month EndETFsETNsTotal
Currently Listed U.S.1,5062081,714
Listed as of 12/31/20141,4512111,662
New Introductions for Month15116
Delistings/Closures for Month505
Net Change for Month+10+1+11
New Introductions 6 Months1026108
New Introductions YTD89493
Delistings/Closures YTD34741
Net Change YTD+55-3+52
Assets Under Mgmt ($ billion)$2,114$28.3$2,142
% Change in Assets for Month+0.6%-1.6%+0.6%
% Change in Assets YTD+7.2%+5.4%+7.2%
Qty AUM > $10 Billion52052
Qty AUM > $1 Billion2677274
Qty AUM > $100 Million79142833
% with AUM > $100 Million52.5%20.2%48.6%
Monthly $ Volume ($ billion)$1,245$41.4$1,286
% Change in Monthly $ Volume-7.6%-10.4%-7.7%
Avg Daily $ Volume > $1 Billion808
Avg Daily $ Volume > $100 Million79483
Avg Daily $ Volume > $10 Million30110311
Actively Managed ETF Count (w/ change)126 +0 mth+1 ytd
Actively Managed AUM ($ billion)$20.4+1.5% mth+18.3% 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 May (sorted by launch date):

  1. ETRACS Monthly Pay 2xLeveraged MSCI US REIT Index ETN due 5/5/45 (LRET), launched 5/6/15, is an exchange-traded note linked to the monthly compounded 2X leveraged performance of the MSCI US REIT Index.  Its monthly dividends should have an initial yield of 6.6% after the 0.85% expense ratio (LRET overview).
  2. PowerShares Europe Currency Hedged Low Volatility Portfolio (FXEUT), launched 5/7/15, tracks an underlying index composed of 80 stocks exhibiting low volatility characteristics. Constituents are weighted relative to the inverse of their volatility, and the holdings are then 100% currency hedged to the US dollar using rolling one month forward contracts.  It has an expense ratio of 0.25% (FXEU overview).
  3. Diamond Hill Valuation-Weighted 500 ETF (DHVW), launched 5/12/15, tracks an underlying index composed of about 500 of the largest US-listed equities weighted by intrinsic value capitalization, using a proprietary, patent-pending valuation methodology. The ETF claims an inception date of 12/30/2011, based on the commencement of the Diamond Hill Valuation-Weighted 500, L.P.  The assets of the Partnership were converted into assets of the fund upon the commencement of operation of the fund.  The underlying index has only been in existence since sometime in 2013.  Therefore, the Partnership’s past performance is not necessarily an indication of how the ETF will perform.  The expense ratio is capped at 0.10% through April 2016 (DHVW overview).
  4. Global X Scientific Beta Asia ex-Japan ETF (SCIX), launched 5/13/15, seeks to track the Scientific Beta Developed Asia-Pacific ex Japan Multi-Beta Multi-Strategy Equal Risk Contribution Index.  The underlying index selects securities by the four factors of value, size, volatility, and momentum.  It then uses a multi-step process that combines multiple weighting methodologies to diversify the risks associated with any one weighting scheme.  The ETF has an expense ratio of 0.38% (SCIX overview).
  5. Global X Scientific Beta Europe ETF (SCID), launched 5/13/15, seeks to track the Scientific Beta Extended Europe Multi-Beta Multi-Strategy Equal Risk Contribution Index.  The underlying index selects securities by the four factors of value, size, volatility, and momentum.  It then uses a multi-step process that combines multiple weighting methodologies to diversify the risks associated with any one weighting scheme.  The ETF has an expense ratio of 0.38% (SCID overview).
  6. Global X Scientific Beta Japan ETF (SCIJ), launched 5/13/15, seeks to track the Scientific Beta Japan Multi-Beta Multi-Strategy Equal Risk Contribution Index.  The underlying index selects securities by the four factors of value, size, volatility, and momentum.  It then uses a multi-step process that combines multiple weighting methodologies to diversify the risks associated with any one weighting scheme.  The ETF has an expense ratio of 0.38% (SCIJ overview).
  7. Global X Scientific Beta US ETF (SCIU), launched 5/13/15, seeks to track the Scientific Beta United States Multi-Beta Multi-Strategy Equal Risk Contribution Index.  The underlying index selects securities by the four factors of value, size, volatility, and momentum.  It then uses a multi-step process that combines multiple weighting methodologies to diversify the risks associated with any one weighting scheme.  The ETF has an expense ratio of 0.35% (SCIU overview).
  8. AccuShares Spot CBOE VIX Down Shares (VXDN), launched 5/19/15, are designed to track the inverse changes in the CBOE Volatility Index (price volatility of the S&P 500 Index) between fund distributions (or measuring periods).  The fund will not invest in anything.  Instead, it will engage principally in cash distributions and potentially paired share distributions in an attempt to deliver the economic exposure inverse of the CBOE VIX.  Such distributions may not represent any income or gains and may represent a return of capital.  Each fund will issue its shares in offsetting pairs, where one constituent of the pair is positively linked to the fund’s underlying index (“Up Shares”) and the other constituent is negatively linked to the fund’s underlying index (“Down Shares”).  Therefore, the fund will only issue, distribute, maintain, and redeem equal quantities of Up and Down shares at all times.  VXDN will have an expense ratio of 0.95% (VXDN overview).
  9. AccuShares Spot CBOE VIX Up Shares (VXUP), launched 5/19/15, are designed to track the changes in the CBOE Volatility Index (price volatility of the S&P 500 Index) between fund distributions (or measuring periods).  The fund will not invest in anything.  Instead, it will engage principally in cash distributions and potentially paired share distributions to deliver the economic exposure of the CBOE VIX.  Such distributions may not represent any income or gains and may represent a return of capital.  Each fund will issue its shares in offsetting pairs, where one constituent of the pair is positively linked to the fund’s underlying index (“Up Shares”) and the other constituent is negatively linked to the fund’s underlying index (“Down Shares”).  Therefore, the fund will only issue, distribute, maintain, and redeem equal quantities of Up and Down shares at all times.  VXUP will have an expense ratio of 0.95% (VXUP overview).
  10. Elkhorn S&P 500 Capital Expenditures Portfolio (CAPX), launched 5/27/15, will track the S&P 500 Capex Efficiency Index, which is designed to provide exposure to constituents that have exhibited strong capital discipline in the form of efficient capital expenditures.  Capital expenditures (capex) are the reinvestment of capital back into the business in order to increase efficiencies, innovation, and growth. Capex-efficient companies maximize the amount of sales per dollar of capital expenditures.  The ETF will hold 100 equally weighted stocks, yield about 1.6%, and have an expense ratio of 0.29% (CAPX overview).
  11. Direxion Daily S&P Biotech Bear 3x Shares (LABD), launched 5/28/15, seeks daily investment results, before fees and expenses, that are 300% of the inverse daily performance of the S&P Biotechnology Select Industry Index with an expense ratio of 0.95% (LABD overview).
  12. Direxion Daily S&P Biotech Bull 3x Shares (LABU), launched 5/28/15, seeks daily investment results, before fees and expenses, that are 300% the daily performance of the S&P Biotechnology Select Industry Index with an expense ratio of 0.95% (LABU overview).
  13. Direxion Daily S&P Oil & Gas Exploration & Production Bear 3x Shares (DRIP), launched 5/28/15, seeks daily investment results, before fees and expenses, that are 300% of the inverse daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index with an expense ratio of 0.95% (DRIP overview).
  14. Direxion Daily S&P Oil & Gas Exploration & Production Bull 3x Shares (GUSH), launched 5/28/15, seeks daily investment results, before fees and expenses, that are 300% of the daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index with an expense ratio of 0.95% (GUSH overview).
  15. Global X YieldCo Index ETF (YLCO), launched 5/13/15, will track an underlying index of YieldCos, companies in a relatively new asset class in the renewable energy space that are structured similar to MLPs.  Renewable energy companies are often risky since the technology is often unproven and cash flows are uncertain.  Share prices can be volatile, leading investors to require a higher level of returns for accepting such risks.  By design, YieldCos have significantly lower risk profiles than their parent companies, as they typically contain only stable energy producing assets with predictable cash flows, and they are not involved in the riskier business of bringing new projects online. Additionally, their primary focus is on distributing available cash flows to shareholders, rather than reinvesting in new technologies or building new projects.  This ETF will have an expense ratio of 0.65% (YLCO overview).
  16. WisdomTree Japan Dividend Growth Fund (JDG), launched 5/13/15, tracks an index of Japanese growth stocks weighted by dividends.  Like the currency-hedged version (JHDG) launched last month, it is not a dividend growth fund.  It has an expense ratio of 0.43% (JDG overview).

Product closures/delistings in May:

  1. Deutsche X-trackers In-Target Date (TDX)
  2. Deutsche X-trackers 2010 Target Date (TDD)
  3. Deutsche X-trackers 2020 Target Date (TDH)
  4. Deutsche X-trackers 2030 Target Date (TDN)
  5. Deutsche X-trackers 2040 Target Date (TDV)

Product changes in May:

  1. Credit Suisse rebranded many of its ETNs the X-Links ETNs (X-Links press release) effective May 4.
  2. The SPDR BofA Merrill Lynch Crossover Corporate Bond ETF changed its ticker symbol form XOVR to CJNK effective May 12.
  3. Direxion had reverse splits on eight ETFs and forward splits on eleven ETFs effective May 20 (press release).
  4. ProShares had reverse splits on nine ETFs and forward splits on twelve ETFs effective May 20 (press release).
  5. PowerShares fired Research Affiliates, LLC as the index provider for its fundamental style-box ETFs.  The Frank Russell Company was hired as the new index provider, and the funds no longer pursue the same objectives.  Rather than closing 10 ETFs and launching new ones, PowerShares chose the “extreme-makeover” path, making their historical performance irrelevant and confusing investors.  See the PowerShares press release for additional information on these changes that took effect May 26.

Announced Product Changes for Coming Months:

  1. ProShares Ultra Australian Dollar (GDAY) will have its last day of trading June 18 and then be closed and liquidated.
  2. Direxion Daily Gold Bull 3x Shares (BAR) will have its last day of trading June 19 and then be closed and liquidated.

Previous monthly ETF statistics reports are available here.

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.

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Friday, May 22nd, 2015

ETF Deathwatch for May 2015: Back Above 300

By Ron Rowland
16:01 pm CDT

The ETF Deathwatch membership rolls jumped higher for May.  Twenty names were added to the list, while only four came off.  The net increase of 16 pushed the total count from 299 to 315, consisting of 221 ETFs and 94 ETNs.  The industry hit a major milestone earlier this month when the number of ETF and ETN closures reached 500.

No funds came off of the list due to closure this month.  Only one fund closed in April, the Source EURO STOXX 50 ETF (ESTX), and it managed to stay off the list for the few days it was eligible.  It was launched last September, and Source announced its closure on March 26 after being on the market only six months and three days.  It was 199 days old when its listing was removed.

ESTX was Source’s only US-listed ETF, which makes Source the shortest-lived sponsor of ETFs ever.  The previous record stood for ten years and belonged to ETF Advisors and their “FITRs” brand of fixed-income ETFs.  The four Treasury FITRs were launched on November 1, 2002.  They had their last day of trading on May 21, 2003 when they were 202 days old, and the firm never sponsored any additional ETFs.

ETF newcomers ARK, Infracap, and Fallah have funds joining ETF Deathwatch this month, and all three firms now have 100% of their ETF product line on the list.  This amounts to just one fund each for Infracap and Fallah, but ARK sponsors four ETFs that are currently struggling.

The average asset level of products on ETF Deathwatch increased from $6.4 million to $6.9 million, and 45 currently have less than $2 million in assets.  The average age increased from 47.1 to 47.2 months, and 96 are now more than five years old.

Here is the Complete List of 315 Products on ETF Deathwatch for May 2015 compiled using the objective ETF Deathwatch Criteria.

The 20 ETPs added to ETF Deathwatch for May:

  1. AdvisorShares Accuvest Global Long Short (AGLS)
  2. AdvisorShares Madrona International (FWDI)
  3. Direxion Daily Mid Cap Bull 2x (MDLL)
  4. ETFS Physical White Metal Basket Shares (WITE)
  5. First Trust Developed Markets x-US Small Cap AlphaDEX (FDTS)
  6. Global X Junior MLP ETF (MLPJ)
  7. Guggenheim BulletShares 2022 HY Corp Bond (BSJM)
  8. iPath Bloomberg Natural Gas TR ETN (GAZ)
  9. iPath US Treasury Steepener ETN (STPP)
  10.  iShares Asia Developed Real Estate (IFAS)
  11. PowerShares S&P Emerging Markets High Beta (EEHB)
  12. PowerShares S&P SmallCap Materials (PSCM)
  13. ProShares Short SmallCap600 (SBB)
  14. ALPS STOXX Europe 600 ETF (STXX)
  15. ARK Genomic Revolution Multi-Sector ETF ARKG)
  16. ARK Innovation ETF (ARKK)
  17. Falah Russell-IdealRatings U.S. Large Cap (FIA)
  18. InfraCap MLP ETF (AMZA)
  19. iShares MSCI Emerging Markets Horizon ETF (EMHZ)
  20. Renaissance International IPO ETF (IPOS)

The 4 ETPs removed from ETF Deathwatch due to improved health:

  1. First Trust China AlphaDEX (FCA)
  2. iShares MSCI Colombia Capped (ICOL)
  3. ProShares Ultra Euro (ULE)
  4. ProShares UltraShort Utilities (SDP)

The ETPs removed from ETF Deathwatch due to delisting:

none

ETF Deathwatch Archives

Disclosure covering writer:  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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Tuesday, May 19th, 2015

500 ETF Closures

By Ron Rowland
18:06 pm CDT

As of today (May 19, 2015), 500 ETFs and ETNs have closed, delisted, and are no longer with us.  500 deaths is a major milestone for the ETF industry.  Although it may not be a welcome and celebrated milestone, it is healthy and necessary for the industry to move forward.

To put this number in perspective, a grand total of 2,207 ETFs and ETNs have been listed on US exchanges.  The 500 closures represents a 22.7% mortality rate.  Those aren’t exactly great odds, but it could be worse.  Of the 1,712 products still remaining and listed for trading today, a full 315 are on the May ETF Deathwatch list.  Another 113 were introduced in the last six months and are not included in the Deathwatch statistics.

Yesterday (5/18/15) was the last day of trading for the five Deutsche X-trackers Target Date ETFs.  Launched in 2007, and originally under the xShares/TD America brand, these five funds had assets totaling more than $135 million when the closures were announced.  This $27-million average is higher than the assets of 548 other ETFs and ETNs still trading today.  Along with the massive closure of 18 iShares ETFs last October, Duetsche Bank (DB) and BlackRock (BLK) are redefining what it takes to survive in the ETF space.

Breaking down the launches and closures by ETFs and ETNs reveals that life is only slightly more difficult for ETNs.  Of the 2,207 product launches, 1,929 have been ETFs and 278 have been ETNs.  Meanwhile, the 500 closures consist of 430 ETFs and 70 ETNs.  So far, ETF survivability has been 77.7% and ETN survivability comes in at 74.8%.

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.

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