The ETF industry recorded another first in January with the first ETFs to convert from active management to passive tracking of an index. Without any fanfare, Alpha Architect converted MomentumShares International Quantitative Momentum (IMOM), MomentumShares U.S. Quantitative Momentum (QMOM), ValueShares International Quantitative Value (IVAL), and ValueShares U.S. Quantitative Value (QVAL) from active to passive management effective January 31. The funds were previously managed with quantitative models, and those models are now driving the underlying indexes, so there should not be any change in the characteristics of these focused factor ETFs.
Seventeen new exchange-traded funds (“ETFs”) and exchange-traded notes (“ETNs”) came to market in January, and there were three closures. The listed count now stands at 1,978, consisting of 1,787 ETFs and 191 ETNs. Five of the new ETF launches were actively managed, but the four conversions described above dropped the net increase to one, leaving the U.S. ETF industry with 164 actively managed ETFs at the end of the month.
New launches also included six smart-beta ETFs and four using a fund-of-funds structure. New issuers included Davis Funds and the QuantX brand of ETFs from Blue Sky Asset Management. Also in the mix were two ETNs issued by UBS and co-branded by ProShares.
Assets increased by 3.7% to $2.63 trillion, the result of $53.2 billion in market gains and $40.9 billion of net inflows. Inflows were at their lowest level of the past three months. The quantity of ETFs with assets of $10 billion or more increased by two to 60, and they control 63% of industry assets. Products with at least $1 billion in assets increased from 289 to 303. The median asset level is $70.8 million.
Trading activity declined by 9.1% to $1.4 trillion. ETFs with an average daily dollar volume of $100 million or more increased by two to 107, and they accounted for 84.9% of all ETF dollars traded.
ETF Stats for January 2017
| January 2017 Month End | ETFs | ETNs | Total |
|---|---|---|---|
| Currently Listed U.S. | 1,787 | 191 | 1,978 |
| Listed as of 12/31/2016 | 1,774 | 190 | 1,964 |
| New Introductions for Month | 15 | 2 | 17 |
| Delistings/Closures for Month | 2 | 1 | 3 |
| Net Change for Month | +13 | +1 | +14 |
| New Introductions 6 Months | 116 | 8 | 124 |
| New Introductions YTD | 15 | 2 | 17 |
| Delistings/Closures YTD | 2 | 1 | 3 |
| Net Change YTD | +13 | +1 | +14 |
| Assets Under Management | $2,612 B | $22.5 B | $2,635 B |
| % Change in Assets for Month | +3.7% | +3.7% | +3.7% |
| % Change in Assets YTD | +3.7% | +3.7% | +3.7% |
| Qty AUM > $10 Billion | 60 | 0 | 60 |
| Qty AUM > $1 Billion | 299 | 4 | 303 |
| Qty AUM > $100 Million | 849 | 34 | 883 |
| % with AUM > $100 Million | 47.5% | 17.8% | 44.6% |
| AUM Flows for Month | +$40.2 B | +$0.7 B | +$40.9 B |
| AUM Flows YTD | +$40.2 B | +$0.7 B | +$40.9 B |
| Monthly $ Volume | $1,401 B | $51.6 B | $1,453 B |
| % Change in Monthly $ Volume | -9.7% | +10.90% | -9.1% |
| Avg Daily $ Volume > $1 Billion | 8 | 0 | 8 |
| Avg Daily $ Volume > $100 Million | 102 | 5 | 107 |
| Avg Daily $ Volume > $10 Million | 363 | 12 | 375 |
| Actively Managed ETF Count (w/ change) | 164 | +1 mth | +1 ytd |
| Actively Managed AUM | $30.9 B | +3.1% mth | +3.1% 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 January (sorted by launch date):
- Direxion Daily Consumer Staples Bear 1x Shares (SPLZ), launched 1/5/17, seeks daily investment results of 100% of the inverse of the performance of the Consumer Staples Select Sector Index. Its expense ratio is capped at 0.45% (SPLZ overview).
- Direxion Daily Utilities Bear 1x Shares (UTLZ), launched 1/5/17, seeks daily investment results of 100% of the inverse of the performance of the Utilities Select Sector Index, and it caps its expense ratio at 0.45% (UTLZ overview).
- UBS ETRACS – ProShares Daily 3x Inverse Crude ETN (WTID), launched 1/5/17, is an ETN linked to the daily compounded 3x leveraged inverse performance of the Bloomberg WTI Crude Oil Subindex ER, less investor fees of 1.85% per annum (WTID overview).
- UBS ETRACS – ProShares Daily 3x Long Crude ETN (WTIU), launched 1/5/17, an ETN linked to the daily compounded 3x leveraged performance of the Bloomberg WTI Crude Oil Subindex ER, less investor fees of 1.45% per annum (WTIU overview).
- ALPS/Dorsey Wright Sector Momentum ETF (SWIN), launched 1/10/17, seeks to track the performance of the Dorsey Wright US Sector Momentum Index. It selects the three highest momentum sectors and allocates 10 securities to each at 2%/security (20%/sector). It then selects the next four highest momentum sectors and allocates five securities to each at 2%/security (10%/sector). The ETF has an expense ratio of 0.40% (SWIN overview).
- Davis Select Financial ETF (DFNL), launched 1/12/17, is an actively managed ETF utilizing the Davis Investment Discipline. It seeks long-term capital appreciation from companies worldwide engaged in the financial services sector, typically holding between 15 and 35 stocks. The methodology includes extensive research to identify businesses that possess characteristics that are believed to foster the creation of long-term value, such as proven management, a durable franchise and business model, and sustainable competitive advantages. It then aims to invest in such businesses when they are trading at discounts to their intrinsic worth, based upon fundamental analysis of cash flows, assets and liabilities, and other criteria deemed to be material. The expense ratio is capped at 0.65% (DFNL overview).
- Davis Select U.S. Equity ETF (DUSA), launched 1/12/17, is an actively managed ETF utilizing the Davis Investment Discipline. It seeks long-term capital appreciation from U.S. companies, generally holding between 15 and 35 stocks. The methodology includes extensive research to identify businesses that possess characteristics that are believed to foster the creation of long-term value, such as proven management, a durable franchise and business model, and sustainable competitive advantages. It then aims to invest in such businesses when they are trading at discounts to their intrinsic worth, based upon fundamental analysis of cash flows, assets and liabilities, and other criteria deemed to be material. The expense ratio is capped at 0.60% (DUSA overview).
- Davis Select Worldwide ETF (DWLD), launched 1/12/17, is an actively managed ETF utilizing the Davis Investment Discipline. It seeks long-term capital appreciation from companies worldwide (U.S., developed, and emerging markets), nominally having 40% international exposure while holding between 35 and 50 stocks. The methodology includes extensive research to identify businesses that possess characteristics that are believed to foster the creation of long-term value, such as proven management, a durable franchise and business model, and sustainable competitive advantages. It then aims to invest in such businesses when they are trading at discounts to their intrinsic worth, based upon fundamental analysis of cash flows, assets and liabilities, and other criteria deemed to be material. The expense ratio is capped at 0.65% (DWLD overview).
- PowerShares Treasury Collateral Portfolio (CLTL), launched 1/12/17, seeks to track the ICE U.S. Treasury Short Bond Index. The Index measures the performance of U.S. Treasury Obligations with a maximum remaining term to maturity of 12 months. The ETF is not a money market fund and does not attempt to maintain a stable net asset value (NAV). It is rebalanced and reconstituted monthly, and currently has an effective duration of 0.4 years, a yield of 0.6%, and an expense ratio of 0.08% (CLTL overview).
- Virtus Cumberland Municipal Bond ETF (CUMB), launched 1/18/17, is an actively managed ETF and seeks to maximize total return of income and capital appreciation. The ETF employs a barbell structure emphasizing shorter-term and longer-term bonds. This helps it benefit from the steepness of the municipal yield curve and allows it to capitalize on moves in the municipal bond yield curve and municipal “centric” events, such as pre-refundings of municipal bonds and upgrades of municipal credits. The ETF will dynamically change over the interest rate cycle with changes in durations and maturities depending upon economic outlook, inflation, Federal Reserve decision making, and the shape of the yield curve. The expense ratio is capped at 0.59% (CUMB overview).
- QuantX Dynamic Beta US Equity ETF (XUSA), launched 1/26/17, attempts to create smarter risk exposure relative to its FTSE/Russell 1000 Index benchmark. Security selection and portfolio beta are optimized in an attempt to maximize upside/downside capture by identifying companies that have more upside (good) volatility versus downside (bad) volatility using option market data. The overall portfolio beta is designed to dynamically adjust to changes in market volatility in an attempt to optimize risk-adjusted returns. XUSA has an expense ratio of 0.59% (XUSA overview).
- QuantX Risk Managed Growth ETF (QXGG), launched 1/26/17, is a fund-of-funds ETF tracking the QuantX Risk Managed Growth Index. It attempts to provide investors with global (developed and emerging) equity exposure with downside protection. The fund uses a proprietary methodology seeking to select the best-performing domestic and international equity ETFs in an attempt to maximize capital growth. Portfolio exposure to cash and fixed-income instruments is managed in an attempt to provide downside protection during times of market stress. QXGG comes with an expense ratio of 1.22% (QXGG overview).
- QuantX Risk Managed Multi-Asset Income ETF (QXMI), launched 1/26/17, is a fund-of-funds ETF tracking the QuantX Risk Managed Multi-Asset Class Income Index. It attempts to provide investors with exposure to higher-yielding asset classes with downside protection. The ETF uses a proprietary methodology seeking to select the best-performing fixed-income and equity ETFs in an attempt to maximize income and capital growth. Portfolio exposure to cash and fixed-income instruments is managed in an attempt to provide downside protection during times of market stress. QXMI has an expense ratio of 1.12% (QXMI overview).
- QuantX Risk Managed Multi-Asset Total Return ETF (QXTR), launched 1/26/17, is a fund-of-funds ETF tracking the QuantX Risk Managed Multi-Asset Total Return Index. It attempts to provide investors with exposure to higher-returning asset classes with downside protection. The ETF uses a proprietary methodology seeking to select the best-performing asset class ETFs in an attempt to maximize total returns. Portfolio exposure to cash and fixed-income instruments is managed in an attempt to provide downside protection during times of market stress. QXTR comes with an expense ratio of 1.51% (QXTR overview).
- QuantX Risk Managed Real Return ETF (QXRR), launched 1/26/17, is a fund-of-funds ETF tracking the QuantX Risk Managed Real Return Index. It attempts to provide access to inflation-sensitive asset classes with downside protection. The ETF uses a proprietary methodology seeking to select the best-performing equity and commodity ETFs in an attempt to maximize real returns. Portfolio exposure to cash and fixed-income instruments is managed in an attempt to provide downside protection during times of market stress. It has an expense ratio of 1.22% (QXRR overview).
- Franklin Liberty International Opportunities ETF (FLIO), launched 1/27/17, is an actively managed ETF seeking long-term capital appreciation by investing in equity securities in developed, developing, and frontier markets outside of the U.S. across the entire market-capitalization spectrum. It attempts to be a diversified high-conviction portfolio currently holding 109 stocks with 44% exposure to Europe and 41% to Asia. The new ETF caps its expense ratio at 0.64% (FLIO overview).
- SPDR Long Dollar Gold Trust (GLDW), launched 1/30/17, seeks to track the performance of the Solactive GLD Long USD Gold Index, which is designed to represent the daily performance of a long position in physical gold and a short position in a foreign currency basket. The currency basket is composed of the euro, Japanese yen, British pound sterling, Canadian dollar, Swedish krona, and Swiss franc. GLDW has an expense ratio of 0.50% (GLDW overview).
Product closures in January and last day of listed trading:
- RBC Yorkville MLP Distribution Growth Leaders Liquid PR ETN (YGRO), 1/20/17
- ETFS Zacks Earnings Large-Cap U.S. (ZLRG), 1/23/17
- ETFS Zacks Earnings Small-Cap U.S. (ZSML), 1/23/17
Product changes in January:
- ProShares executed forward splits on seven ETFs and reverse splits on six ETFs effective January 12.
- The Pacer Global High Dividend ETF (PGHD) was renamed the Pacer Global Cash Cows Dividend ETF (GCOW) effective January 13.
- Victory CEMP ETFs were rebranded as the VictoryShares ETFs effective January 20.
- The iShares Core Russell U.S. Value ETF (IUSV) changed its underlying index and name, becoming the iShares Core S&P U.S. Value ETF (IUSV) effective January 23.
- The iShares Core Russell U.S. Growth ETF (IUSG) changed its underlying index and name, becoming the iShares Core S&P U.S. Growth ETF (IUSG) effective January 23.
- Dhandho Junoon ETF (JUNE) shareholders approved the reorganization and acquisition of the fund by Cambria. The transaction closed January 23, 2017. Cambria will now provide custodian and administrative services while Dhandho continues to manage the fund.
- Alpha Architect quietly converted its four ETFs from actively managed to passive index tracking effective January 31. The affected ETFs are MomentumShares International Quantitative Momentum (IMOM), MomentumShares U.S. Quantitative Momentum (QMOM), ValueShares International Quantitative Value (IVAL), and ValueShares U.S. Quantitative Value (QVAL).
Announced product changes for coming months:
- Gavekal Knowledge Leaders Emerging Markets (KLEM) will close and liquidate, with its last day of trading being February 10.
- Horizons ETF Management announced that it intends to acquire the four Recon Capital ETFs (DAX, QYLD, USMR, and BMLA), with the transition expected to be finalized in 1Q 2017.
- PIMCO will close and liquidate the PIMCO Diversified Income Active ETF (DI) and the PIMCO Global Advantage Inflation-Linked Bond Active ETF (ILB), with March 31 being the last day of trading. At the time of the announcement, DI had $42.5 million in assets and ILB held $79.8 million.