Monday, July 27th, 2015

ETF Deathwatch for July 2015: Old Age Is Not A Free Pass

By Ron Rowland
15:29 pm CDT

The ETF Deathwatch membership roll increases by three this month, as nine new names join the list and six leave.  The total quantity now stands at 326, consisting of 226 ETFs and 100 ETNs.  This equates to 18.7% of all exchange traded products (“ETPs”) being on ETF Deathwatch (20.1% of which are greater than six months in age).  The 123 products launched during the preceding six months are automatically excluded from the list because all new funds are given a six-month grace period in order to attract investor interest.

There was no predominant investment theme among the nine funds added this month;  however, eight of the nine had one factor in common, and that was their relatively old age.  The BLDRS Europe 100 ADR (ADRU) was launched in November 2002, making it more than 12 years old.  It now has the distinction of being the oldest product on the list, at 152 months.  Other mature products joining the ranks of ETF Deathwatch this month include CurrencyShares Swedish Krona Trust (FXS) at 108 months, PowerShares DB Silver (DBS) at 102 months, ProShares Ultra SmallCap600 (SAA) at 101 months, Market Vectors Chinese Renminbi/USD ETN (CNY) at 88 months, ETRACS CMCI Long Platinum TR ETN (PTM) at 86 months, CS X-Links Long/Short Equity ETN (CSLS) at 64 months, and Guggenheim MSCI Emerging Markets Equal Country Weight (EWEM) at 55 months.

WisdomTree Emerging Markets ex-State-Owned Enterprises (XSOE) has been on the market only seven months, and it is the one exception to the old-age bias of the new members in July.  Still, even when including this youngster, the average age of the nine products joining the list is more than seven years.  As a result, the average age of all 326 names on Deathwatch increased from 48.3 to 50.3 months, and 105 are now more than five years old.

There are a couple of observations that can be gleaned from this data.  First, the list is not saturated with newly introduced funds needing more than a six-month grace period as some sponsors have suggested.  Second, successfully avoiding ETF Deathwatch for years is not a guarantee of being able to remain off of the list.  This month’s newcomers can attest to this second point.

The average asset level of products on ETF Deathwatch increased from $6.8 million to $6.9 million, but the quantity of products with less than $2 million in assets jumped from 49 to 57.  It is clear that a sponsor cannot make money on a fund with $2 million in assets, even with a hefty 1.00% expense ratio.  What is not always clear is why sponsors are willing to subsidize these unprofitable products, and how long they will let the losses mount before pulling the plug.

Here is the Complete List of 326 Products on ETF Deathwatch for July 2015 compiled using the objective ETF Deathwatch Criteria.

The 9 ETPs added to ETF Deathwatch for July:

  1. BLDRS Europe 100 ADR (ADRU)
  2. CS X-Links Long/Short Equity ETN (CSLS)
  3. CurrencyShares Swedish Krona Trust (FXS)
  4. ETRACS CMCI Long Platinum TR ETN (PTM)
  5. Guggenheim MSCI Emerging Market Equal Country Weight (EWEM)
  6. Market Vectors Chinese Renminbi/USD ETN (CNY)
  7. PowerShares DB Silver (DBS)
  8. ProShares Ultra Small Cap600 (SAA)
  9. WisdomTree Emerging Markets ex-State-Owned Enterprises (XSOE)

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

  1. DB Agriculture Double Long ETN (DAG)
  2. Deutsche X-trackers MSCI All China (CN)
  3. Global X China Industrial (CHII)
  4. InfraCap MLP ETF (AMZA)

The 2 ETPs removed from ETF Deathwatch due to delisting:

  1. ProShares Ultra Australian Dollar (GDAY)
  2. Direxion Daily Gold Bull 3x Shares (BAR)

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, July 21st, 2015

ETF Stats for June 2015 – Mid-Year Snapshot

By Ron Rowland
15:56 pm CDT

Thirty new ETFs came to market in June, and only two left.  This was the largest quantity of launches since October 2013, and the net increase of 28 was the largest since February 2012.  The data suggests the industry continues to recover from its 2012-2013 slump.  The 133 introductions by the year’s mid-point puts 2015 launch activity on pace to be the third best ever.  The record 308 introductions of 2011 appear safe for now, as does 2007’s second-best count of 291.  As June came to a close, there were 1,742 products (1,534 ETFs and 208 ETNs) listed for trading.

None of the launch or closure activity in June involved ETNs.  The ETN segment of the market has clearly stalled.  When they first arrived on the scene, ETNs offered exposure to asset classes that ETFs had been shying away from – namely commodities, MLPs, and volatility.  As such, investors were able to overlook the “unsecured debt” structure of ETNs in order to get their desired exposure.  However, ETFs have gradually introduced products with similar exposures that are also secured by the assets in the fund.  The ETN segment takes another step backward with the July closure and redemption of all 13 of the RBS ETNs.

Currency hedging remains a top theme with ETF sponsors.  This sub-group of international funds gained favor the past few years as the strategy produced good results in an era of a strengthening US Dollar.  It now looks like a land grab, with sponsors rushing to get currency-hedged versions of every successful international ETF to market.  In June, WisdomTree added two currency-hedged funds to its lineup, Direxion brought out two with leverage, SPDR added one, and ProShares introduced its first two currency-hedged ETFs.

Hedge fund replication ETFs have met with limited success, but that didn’t stop Highland from entering the arena with three such products.  The frenzy over China A-shares prompted Direxion to introduce an inverse version, and the timing was nearly impeccable.  iShares brought out two more factor-based ETFs.  In what appears to be an unusual misstep for BlackRock and its iShares ETFs, one of its new funds claims to be a “single-factor” ETF focusing on the “size” factor, but it will track a risk-weighted index of large and mid-cap international stocks.  Perhaps it should be called a “confusion-factor” ETF.

For the month, industry assets shrunk 1.8% to $2.1 trillion.  The quantity of ETFs with more than $10 billion in assets decreased from 52 to 50, yet these 3% of the listings control 58% of the assets.  Trading activity topped $1.5 trillion in June, and the eight ETFs that averaged more than $1 billion a day in trading accounted for the majority (53.5%) of all trading activity.

Given lopsided stats like these, it is much easier to comprehend the liquidity dangers lurking in the other end of the product spectrum.  The 877 smallest ETPs represent 50.3% of the listings yet account for just 1% of the assets.  There are 1,410 products that average less than $10 million in daily trading.  While they represent 80.9% of the listings, they account for only 2.4% of trading.

June 2015 Month EndETFsETNsTotal
Currently Listed U.S.1,5342081,742
Listed as of 12/31/20141,4512111,662
New Introductions for Month30030
Delistings/Closures for Month202
Net Change for Month+280+28
New Introductions 6 Months1194123
New Introductions YTD1194123
Delistings/Closures YTD36743
Net Change YTD+83-3+80
Assets Under Mgmt ($ billion)$2,077$27.3$2,105
% Change in Assets for Month-1.7%-3.8%-1.8%
% Change in Assets YTD+5.3%+1.4%+5.3%
Qty AUM > $10 Billion50050
Qty AUM > $1 Billion2616267
Qty AUM > $100 Million78242824
% with AUM > $100 Million51.0%20.2%47.3%
Monthly $ Volume ($ billion)$1,473$53.8$1,527
% Change in Monthly $ Volume+18.3%+29.9%+18.7%
Avg Daily $ Volume > $1 Billion718
Avg Daily $ Volume > $100 Million85590
Avg Daily $ Volume > $10 Million32012332
Actively Managed ETF Count (w/ change)129 +3 mth+4 ytd
Actively Managed AUM ($ billion)$20.2-1.0% mth+17.2% 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. Highland HFR Equity Hedge ETF (HHDG), launched 6/1/15, will follow an underlying index that seeks to track the returns of hedge funds that employ hedged equity strategies by including securities held by such hedge funds.  It uses a proprietary filtering, monitoring, and quantitative selection process to select appropriate securities from a database of hedge fund holdings.  Equity Hedge managers typically maintain at least 50% exposure to, and may in some cases be entirely invested in, equities – both long and short.  The ETF has an expense ratio of 0.85% (HHDG overview).
  2. Highland HFR Event-Driven ETF (DRVN), launched 6/1/15, seeks to track an underlying index of event-driven strategies that take advantage of transaction announcements and other specific one-time events.  It will utilize an investment process that identifies equity opportunities in companies which are currently engaged in a corporate transaction, such as mergers, restructurings, financial distress, tender offers, shareholder buybacks, debt exchanges, security issuance, or other capital structure adjustments.  DRVN has an expense ratio of 0.85% (DRVN overview).
  3. Highland HFR Global ETF (HHFR), launched 6/1/15, will track an index constructed to mimic returns of hedge funds by using a proprietary filtering, monitoring, and quantitative selection process to select appropriate securities from a database of hedge fund holdings.  Equity hedge strategies involve a variety of investment styles (both quantitative and fundamental) that may include event-driven, long/short equity, macro, relative value, and other strategies.  The fund will not have more than 50% exposure representing any one equity hedge strategy and comes with an expense ratio of 0.85% (HHFR overview).
  4. TrimTabs Intl Free-Cash Flow ETF (FCFI), launched 6/2/15, will track an underlying index that utilizes an equal weighting by country approach.  Candidates for inclusion are first ranked by free cash flow yield.  The ten global markets composing the fund are then equally weighted, with 10% allocated to each: Canada, Germany, United Kingdom, Hong Kong, Japan, France, Switzerland, Netherlands, South Korea, and Australia. The ETF has an expense ratio of 0.69% (FCFI overview).
  5. iShares Convertible Bond ETF (ICVT), launched 6/4/15, seeks to track the investment results of an index composed of US Dollar-denominated convertible securities, specifically cash pay bonds, with outstanding issue sizes greater than $250 million.  Its largest sector exposures include Technology 41.4%, Consumer Staples 20.0%, and Consumer Discretionary 11.2%.  ICVT has an expense ratio of 0.35% (ICVT overview).
  6. WisdomTree Global ex-U.S. Hedged Dividend Fund (DXUS), launched 6/4/15, tracks an index that measures the performance of dividend-paying companies in the developed and emerging markets outside of the United States while neutralizing exposure to currency movements relative to the US Dollar.  The index is dividend weighted with country weights equal to the float-adjusted market capitalization weight of the universe of the selected top 1000 stocks.  DXUS has an expense ratio of 0.44% (DXUS overview).
  7. WisdomTree International Hedged SmallCap Dividend Fund (HDLS), launched 6/4/15, tracks a fundamentally weighted index that measures the performance of small-cap dividend-paying stocks in the industrialized world outside the US and Canada while neutralizing exposure to foreign currencies.  It holds companies that compose the bottom 25% of the market capitalization of the WisdomTree DEFA Index after the 300 largest companies have been removed.  Holdings are weighted based on annual cash dividends paid, and the fund has an expense ratio of 0.58% (HDLS overview).
  8. Direxion Daily MSCI Europe Currency Hedged Bull 2x Shares (HEGE), launched 6/10/15, seeks daily investment results, before fees and expenses, of 200% of the performance of the MSCI Europe US Dollar Hedged Index.  It has an expense ratio of 0.95% and is essentially a 2X version of the Deutsche X-trackers MSCI Europe Hedged ETF (DBEU) (HEGE overview).
  9. Direxion Daily MSCI Japan Currency Hedged Bull 2x Shares (HEGJ), launched 6/10/15, seeks daily investment results, before fees and expenses, of 200% of the performance of the MSCI Japan US Dollar Hedged Index. It has an expense ratio of 0.95% and is essentially a 2X version of the Deutsche X-trackers MSCI Japan Hedged ETF (DBJP) (HEGJ overview).
  10. Market Vectors Global Spin-Off ETF (SPUN), launched 6/10/15, seeks to track a rules-based, equal-weighted index of spin-offs that are domiciled and trade in the US or developed markets of Western Europe and Asia.  It will hold positions a maximum of five years and currently consists of 78 holdings with 68% allocated to US companies.  SPUN has an expense ratio of 0.55% (SPUN overview).
  11. SPDR EURO STOXX 50 Currency Hedged ETF (HFEZ), launched 6/10/15, seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the underlying index, which is hedged against currency fluctuations.  The fund has an expense ratio of 0.32% (HFEZ overview).
  12. Tuttle Tactical Management Multi-Strategy Income ETF (TUTI), launched 6/10/15, is an actively managed fund-of-funds seeking capital preservation and income with a secondary emphasis on long-term capital appreciation.  It is a trend aggregation-based strategy using multiple, uncorrelated methodologies to determine which phase markets are in.  TUTI uses intermediate-term momentum and short-term countertrend indicators, and it sports an expense ratio of 1.28% (TUTI overview).
  13. WisdomTree Western Asset Unconstrained Bond Fund (UBND), launched 6/11/15, is an actively managed bond ETF without any constraints on its investment holdings.  It currently has about 45% in junk bonds, is long the Indian Rupee and Japanese Yen, and short the Euro, the British Pound, and US Treasuries.  The website claims a 30-day SEC yield of 3.68% after covering the 0.55% expense ratio (UBND overview).
  14. Pacer Trendpilot 100 ETF (PTNQ), launched 6/3/15, seeks to track the NASDAQ 100 Index when it is above its 200-day moving average for five days, moves to 50% T-Bills when the index falls below its 200-day moving average for five days, and moves to 100% T-Bills when the 200-day moving average has a 5-day negative slope.  The ETF has an expense ratio of 0.65% (PTNQ overview).
  15. Pacer Trendpilot 450 ETF (PTMC), launched 6/3/15, seeks to track the Wilshire US Mid-Cap Index when it is above its 200-day moving average for five days, moves to 50% T-Bills when the index falls below its 200-day moving average for five days, and moves to 100% T-Bills when the 200-day moving average has a 5-day negative slope.  The fund carries an expense ratio of 0.60% (PTMC overview).
  16. Pacer Trendpilot 750 ETF (PTLC), launched 6/3/15, seeks to track the Wilshire US Large-Cap Index when it is above its 200-day moving average for five days, moves to 50% T-Bills when the index falls below its 200-day moving average for five days, and moves to 100% T-Bills when the 200-day moving average has a 5-day negative slope.  The expense ratio for PTLC is 0.60% (PTLC overview).
  17. Direxion Daily CSI 300 China A Share Bear 1x Shares (CHAD), launched 6/17/15, seeks daily investment results, before fees and expenses, of 100% of the inverse of the performance of the CSI 300 Index.  It is the inverse version of the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR) and has an expense ratio of 0.80% (CHAD overview).
  18. iShares MSCI International Developed Size Factor ETF (ISZE), launched 6/18/15, seeks to track the investment results of an index composed of international developed large- and mid-capitalization stocks with relatively smaller average market capitalization.  Despite having “Size Factor” as part of its name, the ETF tracks the MSCI ex USA Risk Weighted Index that provides “exposure to large- and mid-cap developed international stocks.”   Investors will pay 0.30% to own this murkily defined ETF (ISZE overview).
  19. iShares MSCI International Developed Value Factor ETF (IVLU), launched 6/18/15, seeks to track the investment results of the MSCI World ex-USA Enhanced Value Index, an index composed of international developed large- and mid-capitalization stocks with value characteristics and relatively lower valuations.  IVLU has an expense ratio of 0.30% (IVLU overview).
  20. ProShares Ultra Homebuilders & Supplies (HBU), launched 6/23/15, seeks daily investment results, before fees and expenses, that correspond to two times (2X) the daily performance of the Dow Jones US Select Home Construction Index and comes with an expense ratio of 0.95% (HBU overview).
  21. ProShares UltraShort Homebuilders & Supplies (HBZ), launched 6/23/15, seeks daily investment results, before fees and expenses, that correspond to two times the inverse (-2X) of the daily performance of the Dow Jones US Select Home Construction Index.  It has an expense ratio of 0.95% (HBZ overview).
  22. ProShares Ultra Oil & Gas Exploration & Production (UOP), launched 6/23/15, seeks daily investment results, before fees and expenses, that correspond to two times (2X) the daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index.  UOP has an expense ratio of 0.95% (UOP overview).
  23. ProShares UltraShort Oil & Gas Exploration & Production (SOP), launched 6/23/15, seeks daily investment results, before fees and expenses, that correspond to two times the inverse (-2X) of the daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index and comes with a 0.95% expense ratio (SOP overview).
  24. ProShares UltraPro Nasdaq Biotechnology (UBIO), launched 6/23/15, seeks daily investment results, before fees and expenses, that correspond to three times (3X) the daily performance of the NASDAQ Biotechnology Index and has an expense ratio of 0.95% (UBIO overview).
  25. ProShares UltraProShort Nasdaq Biotechnology (ZBIO), launched 6/23/15, seeks daily investment results, before fees and expenses, that correspond to three times the inverse (-3X) of the daily performance of the NASDAQ Biotechnology Index.  ZBIO has an expense ratio of 0.95% (ZBIO overview).
  26. Deutsche X-trackers Japan JPX-Nikkei 400 Equity ETF (JPN), launched 6/24/15, seeks to track the JPX-Nikkei 400 Total Return Index, a benchmark consisting of 400 Japanese securities that pass a rigorous screening process including return on equity, cumulative operating profit, and market capitalization to select high-quality, capital-efficient Japanese companies.  JPN is not currency hedged and has an expense ratio of 0.40% (JPN overview).
  27. Hull Tactical US ETF (HTUS), launched 6/25/15, is an actively managed fund-of-funds ETF guided by a proprietary, patent-pending, quantitative trading model.  It can take positions in ETFs that are long, short, and leveraged to the S&P 500.  HTUS states an expense ratio of 1.00% consisting of a 0.91% management fee and a 0.09% acquired fund fee.  Since most leveraged funds have expense ratios of 0.95%, the acquired fund fee, and therefore total expense ratio, is likely understated (HTUS overview).
  28. ProShares Hedged FTSE Europe ETF (HGEU), launched 6/25/15, seeks investment results, before fees and expenses, corresponding to the performance of the FTSE Developed Europe 100% Hedged to USD Index.  It invests in large- and mid-cap European stocks and hedges against risk from six European currencies for an expense ratio of 0.27% (HGEU overview).
  29. ProShares Hedged FTSE Japan ETF (HGJP), launched 6/25/15, seeks investment results, before fees and expenses, corresponding to performance of the FTSE Japan 100% Hedged to USD Index.  It invests in large- and mid-cap Japanese stocks and hedges against risk from the Japanese Yen with an expense ratio of 0.23% (HGJP overview).
  30. Tortoise North American Pipeline Fund (TPYP), launched 6/30/15, tracks an underlying index, established five years ago, representing the pipeline industry.  MLP exposure is currently at 20%, allowing this ETF to operate as a pass-through Registered Investment Company (“RIC”).  Tortoise is a new ETF sponsor, but the firm launched the first MLP closed-end fund in 2004.  TPYP has 102 holdings and an expense ratio of 0.70% (TPYP overview).

Product closures/delistings in June:

  1. ProShares Ultra Australian Dollar (GDAY)
  2. Direxion Daily Gold Bull 3x Shares (BAR)

Product changes in June:

  1. VelocityShares Daily 2x VIX Short-Term ETN (TVIX) underwent a 1-for-10 reverse split effective June 23.

Announced Product Changes for Coming Months:

  1. RBS will close and redeem its entire line of US-listed ETNs, which includes its Trendpilot line and the Rogers commodity offerings.  The last day of trading will be July 6 with liquidation payments expected seven business days later.
  2. First Trust will switch the primary exchange listing for 10 single-country ETFs from the NYSE to the NASDAQ effective July 14.
  3. BlackRock will close 18 iShares ETFs with August 21 set as the last day of trading.
  4. The iShares MSCI USA ETF (EUSA), a capitalization-weighted fund, will undergo an extreme makeover on August 31 becoming the iShares MSCI USA Equal Weighted ETF (EUSA).
  5. The iShares iBonds Sep 2015 AMT-Free Muni Bond ETF (IBMD) is scheduled to mature and will cease trading after the market closes on September 1.
  6. The iShares Japan large-Cap ETF (ITF), based on the S&P/TOPIX 150 Index, will undergo an extreme makeover on September 4 becoming the iShares JPX-Nikkei 400 ETF (ITF).

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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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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