The quantity of funds on ETF Deathwatch surged by 20 this month, establishing a new record high. With 28 new names joining the list and just eight leaving, the membership roll now has 418 entries and easily surpasses the previous record of 403 set in September 2012. On a percentage basis, one can make the argument that the industry is healthier today than it was in 2012. Indeed, the 403 funds on ETF Deathwatch at the previous peak represented 27.3% of the 1,474 listings at the time. This month’s 418 members of ETF Deathwatch account for “only” 22.4% of the 1,863 active listings at the end of February. However, it appears the current upswing has a long way to go, and the previous 27.3% could eventually be surpassed too.
Launching a successful ETF in today’s environment is tough. For starters, the world needs to know that you have a new product. With new ETFs being launched every week, that might be tougher than it sounds, because your press release is likely to get lost in the noise. If you get past that hurdle, then you must be able to articulate what sets your product apart from the more than 1,800 other choices available to U.S. ETF investors. All of the easily definable categories are covered, and some categories that proved to be successful for the first movers are now overrun with me-too products.
Does the world need another dividend ETF? ETF sponsors seem to think so and rolled out 58 additional ones in 2015. What makes these any different or better than the dividend ETFs that came before? Generally, the answer is “very little,” but that doesn’t stop firms from trying. There are too many dividend ETFs, more than the market can absorb, resulting in more and more showing up on Deathwatch every month.
Back in August, O’Shares, a relatively new ETF sponsor run by Kevin O’Leary of Shark Tank fame, expanded its lineup with four new dividend ETFs. Today, all four join ETF Deathwatch. On Shark Tank, Mr. O’Leary claims to be interested in only one thing—making money. The four O’Shares ETFs joining ETF Deathwatch this month have less than $5 million in assets on average. They are not “making money” today, and it is not clear how long they will be subsidized. For now, these four O’Shares ETFs are dead to me.
Another sponsor “land rush” has been in the area of currency-hedged ETFs, with 57 being introduced in 2015. They too are now showing up on Deathwatch in abundance. Fourteen (half) of the ETFs joining the list this month are currency-hedged funds. Additionally, eight of the new additions have the word “dividend” as part of their names. It doesn’t stop there, because sponsors have been combing these two saturated trends in the hopes of finding new fans at the intersection. You guessed it, six of the ETFs joining Deathwatch this month are currency-hedged dividend funds.
Breaking down the ETF Deathwatch membership composition, 315 are ETFs and 103 are ETNs. Slicing the constituents another way reveals that 41 are actively managed, 136 are smart-beta funds, and 241 are traditional cap-weighted index funds. The average asset level of products on ETF Deathwatch dropped from $6.3 million to $6.2 million, and the quantity of products with less than $2 million jumped from 91 to 97. The average age decreased from 47.8 to 46.6 months, and the number of products more than five years old increased from 134 to 138.
Liquidity continues to be a significant risk when buying or selling any of these ETFs. Only 19 of these traded on each of the past 50 market days. The average ETF on the list trades only 49% of the days that the market is open. On the last day of February, 276 ETFs posted zero volume. Twenty-three went the entire month of February without a single trade. A dozen of them are still awaiting their first trade of 2016. Be careful out there.
Here is the Complete List of 418 ETFs and ETNs on ETF Deathwatch for March 2016 compiled using the objective ETF Deathwatch Criteria.
The 28 ETFs and ETNs added to ETF Deathwatch for March:
- Barclays Return on Disability ETN (RODI)
- DB 3x German Bund Futures ETN (BUNT)
- Deutsche X-trackers Japan JPX-Nikkei 400 Hedged (JPNH)
- Deutsche X-trackers MSCI Australia Hedged (DBAU)
- Deutsche X-trackers MSCI AW ex-US High Dividend Yield Hedged (HDAW)
- Deutsche X-trackers MSCI EAFE High Dividend Yield Hedged (HDEF)
- Deutsche X-trackers MSCI EAFE Small Cap Hedged (DBES)
- Deutsche X-trackers MSCI Emerging Market High Dividend Yield Hedged (HDEE)
- Deutsche X-trackers MSCI Eurozone High Dividend Yield Hedged (HDEZ)
- Deutsche X-trackers MSCI Italy Hedged (DBIT)
- Deutsche X-trackers MSCI Southern Europe Hedged (DBSE)
- Deutsche X-trackers MSCI Spain Hedged (DBSP)
- Direxion Daily Homebuilders & Supplies Bear 3x (CLAW)
- Direxion Daily Homebuilders & Supplies Bull 3x (NAIL)
- Direxion Daily Regional Banks Bear 3x (WDRW)
- Direxion Daily Regional Banks Bull 3x (DPST)
- Global X China Industrial (CHII)
- Guggenheim S&P 500 Equal Weight Real Estate (EWRE)
- IQ 50 Percent Hedged FTSE Japan (HFXJ)
- iShares Currency Hedged MSCI Switzerland (HEWL)
- iShares MSCI Colombia Capped (ICOL)
- Market Vectors Oil Refiners (CRAK)
- O’Shares FTSE AsiaPacific Quality Dividend (OASI)
- O’Shares FTSE AsiaPacific Quality Dividend Hedged (OAPH)
- O’Shares FTSE Europe Quality Dividend (OEUR)
- O’Shares FTSE Europe Quality Dividend Hedged (OEUH)
- PowerShares Global Emerging Markets Infrastructure (PXR)
- ProShares UltraPro Short S&P MidCap400 (SMDD)
The 7 ETPs removed from ETF Deathwatch due to improved health:
- ELEMENTS S&P Commodity Trends Indicator ETN (LSC)
- ETRACS 1x Mthly Short Alerian MLP ETN (MLPS)
- iShares iBonds Dec 2024 Term Corporate (IBDP)
- iShares Treasury Floating Rate Bond (TFLO)
- ProShares Ultra Yen (YCL)
- QuantShares U.S. Market Neutral Momentum (MOM)
- SPDR MSCI Canada Quality Mix (QCAN)
The one ETF removed from ETF Deathwatch due to delisting:
- Janus Equal Risk Weighted Large Cap (ERW)
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.