Invest With An Edge

ETF Deathwatch for July 2018

For the month of July, the ETF Deathwatch list increased with the addition of 20 exchange-traded products (ETPs) and the removal of 14. Of the removals, only three were due to asset managers closing their funds, while the remaining 11 were removed due to increased health. There were no major purges of funds this month, as we’ve seen in the past. Summer is typically a relatively quiet season for the financial-services industry. The three funds that were closed were ETFs, and only one addition was an ETN. This is a typical profile between ETFs and ETNs, so there’s no major takeaway as to market appetites for risk this month.

ETFs and ETNs less than 6 months of age are not considered for the ETF Deathwatch list. New ETFs and ETNs need time to attract attention from investors and gain momentum, so we consider their first 6 months an “incubation period.” For July, 11 of new additions to the list were young funds. However, six of the new additions were more than five years old, which is a particularly bad sign for these funds as it indicates declining interest in an established product. Without exception, each of these six belonged either to the Emerging Markets or Leveraged categories. This is not much of a surprise as emerging markets have suffered of late, and interest in leveraged products has already been waning as a secular industry trend.

The one fund that appears out of place on this list is the iShares US Dividend and Buyback ETF (DIVB). It belongs neither to asset classes that are suffering industrywide nor new funds that are still picking up interest. It is still a relatively new fund, at only 9 months old; however, it has slightly underperformed other funds in the high-dividend space. It remains to be seen whether this fund’s returns will justify its existence. Caution is advised.

The year began with some slow fund flows into equity funds. The second and third quarters have seen some minor movement out of these funds, while, for the most part, fixed-income funds have seen positive inflows overall. These fund flows were not extreme, but it wouldn’t be surprising to see the Deathwatch additions dominated by equity funds in the coming months as investors weigh the current market risks that go with the current geopolitical environment. As of now, nothing significant is suggested by the data, but caution may be advised when using financially “creative” equity products for the time being.

Here is the Complete List of 440 ETFs and ETNs on ETF Deathwatch for July 2018 compiled using the objective ETF Deathwatch Criteria.

The 20 ETFs added to ETF Deathwatch for July:

  1. ProShares UltraShort Basic Materials (SMN)
  2. ProShares Ultra MSCI Japan (EZJ)
  3. Invesco China All-Cap ETF (YAO)
  4. ProShares Ultra FTSE Europe (UPV)
  5. ProShares RAFI Long/Short (RALS)
  6. First Trust India Nifty 50 Equ (NFTY)
  7. Global X Next Emerging & Frontier ETF (EMFM)
  8. VictoryShares Emerging Market Volatility Wtd ETF (CEZ)
  9. iShares US Dividend and Buyback ETF (DIVB)
  10. American Century Diversified Corporate Bond ETF (KORP)
  11. American Century STOXX US Quality Value ETF (VALQ)
  12. iPath Series B S&P 500 VIX Mid-Term Futures ETN (VXZB)
  13. iPath Series B Bloomberg Nickel Subindex Total Return ETN (BJJN)
  14. Fidelity International Value Factor ETF (FIVA)
  15. GraniteShares Platinum Trust (PLTM)
  16. JPMorgan Long/Short ETF (JPLS)
  17. US Equity Cumulative Dividends Fund-Series 2027 (IDIV)
  18. US Equity EX Dividend Fund-Series 2027 (XDIV)
  19. Franklin FTSE India ETF (FLIN)
  20. Franklin FTSE Switzerland ETF (FLSW)

The 11 ETFs removed from ETF Deathwatch due to improved health:

  1. SPDR Bloomberg Barclays Corporate Bond ETF (CBND)
  2. Hartford Total Return Bond ETF (HTRB)
  3. John Hancock Multifactor Materials ETF (JHMA)
  4. Morgan Stanley Cushing MLP High Income Index ETN (MLPY)
  5. Developed International Equity Select ETF (RNDM)
  6. SPDR S&P 1500 Value Tilt ETF (VLU)
  7. Invesco S&P SmallCap Quality ETF (XSHQ)
  8. iShares MSCI China A ETF (CNYA)
  9. First Trust Alternative Absolute Return Strategy ETF (FAAR)
  10. First Trust Canada AlphaDEX Fund (FCAN)
  11. Direxion Daily Natural Gas Related Bear 3X Shares (GASX)

The 3 ETFs/ ETN that were closed:

  1. VanEck Vectors EM Investment Grade + BB Rated USD Sovereign Bond ETF (IGEM)
  2. VanEck Vectors Spin-Off ETF (SPUN)
  3. REX VolMAXX Long VIX Futures Strategy ETF (VMAX)