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:
- C-Tracks Citi Volatility Index TR ETN (CVOL)
- ETRACS CMCI Gold TR ETN (UBG)
- ETRACS CMCI Livestock TR ETN (UBC)
- ETRACS Daily Long-Short VIX ETN (XVIX)
- Huntington US Equity Rotation Strategy (HUSE)
- iShares Industrials Bond (ENGN)
- ProShares CDS Short North America HY Credit (WYDE)
- ProShares Global Listed Private Equity (PEX)
- ProShares Ultra S&P Regional Banking (KRU)
- ProShares UltraShort MSCI EAFE (EFU)
- RBS China Trendpilot ETN (TCHI)
- WisdomTree Indian Rupee Strategy (ICN)
- First Trust Emerging Markets Local Bond ETF (FEMB)
- First Trust International IPO ETF (FPXI)
- First Trust Low Duration Mortgage Opportunities (LMBS)
- FlexShares Credit-Scored US Corporate Bond (SKOR)
- PowerShares DB Optimum Yield Diversified Commodity Strategy (PDBC)
The 7 ETPs removed from ETF Deathwatch due to improved health:
- ALPS STOXX Europe 600 ETF (STXX)
- DB 3x German Bund Futures ETN (BUNT)
- iShares Interest Rate Hedged Corporate Bond (LQDH)
- iShares MSCI Europe Minimum Volatility (EUMV)
- iShares MSCI Japan Minimum Volatility (JPMV)
- PowerShares S&P Intl Developed High Beta (IDHB)
- ProShares MSCI EAFE Dividend Growers (EFAD)
The 2 ETPs removed from ETF Deathwatch due to delisting:
- Deutsche X-trackers In-Target Date (TDX)
- Deutsche X-trackers 2010 Target Date (TDD)
ETF Deathwatch Archives
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.