The ETF listing count continues to creep toward 1,600 as assets swell to more than $1.8 trillion. Trading activity mysteriously plunged 21% in May, long before the summer slowdown typically begins.
Fifteen new ETFs rolled out in May, and two ETNs closed and liquidated. The net increase of thirteen for the month puts the count at 1,591 exchange traded products (“ETPs”), consisting of 1,390 ETFs and 201 ETNs. Based on recent launch activity, the ETP count could reach the 1,600 level before the end of June. All growth continues to come from the ETF side of the business as the ETN count declined again.
ETFs with currency and interest rate “hedges” remain a popular theme for new products. This month, iShares rolled out two bond funds that seek to mitigate the negative effect of rising interest rates. These ETFs utilize an interest-rate hedge by selling short Treasury securities while taking long positions in either investment grade or high yield bonds.
The new Merck Gold Trust (OUNZ) is the first ETP providing individual investors with the ability to redeem their shares for gold bullion, although the costs for doing so might seem steep. Still, the new fund will likely be a huge hit with the hard-money crowd.
May also saw product launches for the first single-country ETFs targeting Qatar and United Arab Emirates (“UAE”), a global subordinated debt fund, international dividend growth ETFs, a China small cap offering, target maturity bond funds, and others.
UBS AG ETRACS Fisher-Gartman Risk On ETN (ONN) and UBS AG ETRACS Fisher-Gartman Risk Off ETN (OFF) closed and liquidated. Launched in 2011 when the Risk On / Risk Off trade was popular, these products became unpopular when they failed to adapt to changing market conditions by sticking with an outdated definition of risk.
ETP assets grew 2.3% in May to $1.8 trillion. The number of products exceeding $1 billion jumped by eleven to 238 and account for 88.9% of all ETP assets. Funds with more than $10 billion increased by three to 41, and while these billion dollar funds represent just 2.6% of the active listings, they account for the majority (55.0%) of industry assets. It takes the smallest 794 products to add up to 1% of industry assets.
Asset distribution across products is not a nice statistical bell-shaped curve. While the “average” (or mean) ETP has $1.1 billion in assets, only 215 of the 1,591 (or 13.5%) are above average. Meanwhile, the median size (the size at which half are larger and half are smaller) is only $80 million. An average that is 14 times larger than the median makes for a lopsided distribution.
Trading activity plunged 21.3% in May to $1.16 trillion. There were 21 trading days in the month, so a shortage of days is not the reason. This represents a 16% drop from a year ago, ruling out seasonality as the cause. The slowdown appears to be affecting all products, as the quantity of ETFs averaging more than $1 billion a day was sliced in half to just four – the lowest figure we can recall. Products averaging more than $100 million in dollar volume dropped from 80 to 73, and those able to trade more than $10 million per day fell from 270 to just 255. If this is an indication of this summer’s trading activity, then August could be truly dreadful.
|May 2014 Month End||ETFs||ETNs||Total|
|Currently Listed U.S.||1,390||201||1,591|
|Listed as of 12/31/2013||1,332||204||1,536|
|New Introductions for Month||15||0||15|
|Delistings/Closures for Month||0||2||2|
|Net Change for Month||+15||-2||+13|
|New Introductions 6 Months||87||3||90|
|New Introductions YTD||77||2||79|
|Net Change YTD||+58||-3||+55|
|Actively-Managed Listings||89 (+4)||n/a||89 (+4)|
|Assets Under Mgmt ($ billion)||$1,774||$26.8||$1,801|
|% Change in Assets for Month||+2.3%||-0.3%||+2.3%|
|Qty AUM > $10 Billion||41||0||41|
|Qty AUM > $1 Billion||230||8||238|
|Qty AUM > $100 Million||708||34||742|
|% with AUM > $100 Million||50.9%||16.9%||46.6%|
|Monthly $ Volume ($ billion)||$1,104||$53.4||$1,158|
|% Change in Monthly $ Volume||-22.6%||+22.5%||-21.3%|
|Avg Daily $ Volume > $1 Billion||4||0||4|
|Avg Daily $ Volume > $100 Million||71||2||73|
|Avg Daily $ Volume > $10 Million||248||7||255|
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):
- db X-trackers Solactive Investment Grade Subordinated Debt Fund (SUBD), launched 5/1/14, will invest in both U.S. and international subordinated or junior subordinated corporate bonds that are denominated in U.S. dollars. In order to be included, a bond must have an amount outstanding of at least $500 million and a remaining maturity of at least one year. As of February 28, 2014, the fund had a high concentration of issuers in the financial services sector. It has an expense ratio 0.45% (SUBD overview).
- iShares MSCI Qatar Capped ETF (QAT), launched 5/1/14, is a single-country ETF expanding access to emerging markets by providing exposure to a broad range of companies in Qatar. The fund currently holds 26 positions, of which over 50% are in the Financials sector. Investors will pay 0.61% per year to own the fund (QAT overview).
- iShares MSCI UAE Capped ETF (UAE), launched 5/1/14, is a single-country ETF expanding access to emerging markets by focusing on companies in the United Arab Emirates. The fund currently holds 26 positions, of which over 70% are in the Financials sector with the largest being Emaar Properties at 21%. UAE sports an expense ratio of 0.61% (UAE overview).
- PowerShares Variable Rate Preferred Portfolio (VRP), launched 5/1/14, will invest in preferred stock, as well as certain types of “hybrid securities” that act like preferred stock, paying variable rate dividends or coupons. The securities can be issued by US-based or foreign companies. The fund is capitalization-weighted and will be rebalanced monthly. No yield information is provided. The fund carries a 0.50% expense ratio (VRP overview).
- WisdomTree Europe Dividend Growth Fund (EUDG), launched 5/7/14, is designed to measure the performance of dividend-paying common stocks with growth characteristics of Europe. Securities are selected based on their combined ranking of growth (long-term earnings growth expectations) and quality factors (three-year historical averages for return on equity and return on assets). Weightings will be decided by annual cash dividends paid. EUDG has an expense ratio of 0.58% (EUDG overview).
- WisdomTree International Hedged Dividend Growth Fund (IHDG), launched 5/7/14, seeks to provide exposure to developed market companies while at the same time hedging exposure to fluctuations between the value of foreign currencies and the U.S. dollar. The portfolio makeup will be based on the securities with the best combined rank of growth (long-term earnings growth expectations) and quality factors (three-year historical averages for return on equity and return on assets) from the WisdomTree Dividend Index of Europe, Australasia, and Far East universe. Investors will spend 0.58% annually to own this fund (IHDG overview).
- First Trust Managed Municipal ETF (FMB), launched 5/15/14, is an actively managed ETF with two objectives. The first is to provide current income that is exempt from regular federal income taxes. The second is long-term capital appreciation. At least 80% of the fund will be tax-exempt municipal debt securities. No yield information is given, and it will have a higher than average expense ratio of 0.65% due to its active management (FMB overview).
- Merk Gold Trust (OUNZ), launched 5/16/14, provides investors an option to buy and hold gold through an exchange traded product with the ability to take physical delivery of gold in exchange for their shares. While one may think a gold fund’s primary objective would be to reflect the performance of the price of gold, that is this fund’s secondary objective. The primary is to provide the conversion ability, for which, if exercised, investors will pay exchange and delivery fees ranging from 2.5% (London bars) to 7% (American Eagle 1-ounce coins) with minimums of up to $7,000 (see prospectus). The fund’s expense ratio is 0.40% (OUNZ overview).
- db X-trackers Harvest CSI 500 China A-Shares Small Cap Fund (ASHS), launched 5/21/14, will invest directly in 500 small cap companies listed on the Shanghai and Shenzhen stock exchanges. The most represented sector is Industrials at just under 25%, and Consumer Staples comes in second at 17%. ASHS sports an expense ratio of 0.82% (ASHS overview).
- Direxion Daily S&P 500 Bull 2x Shares (SPUU), launched 5/28/14, seeks daily investment results equal to 200% of the performance of the S&P 500 Index. Direxion has had a 3x versions since 2008 but apparently decided to ratchet it down a notch. The fund has an expense ratio of 0.93% that will be capped at 0.60% until September 1, 2015 (SPUU overview).
- iShares Interest Rate Hedged Corporate Bond ETF (LQDH), launched 5/29/14, is an actively managed fund-of-funds seeking to mitigate interest rate risk by holding iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and short positions in U.S. Treasury futures. The fund has an expense ratio of 0.45% that will be capped at 0.25% through February 2016 (LQDH overview).
- iShares Interest Rate Hedged High Yield Bond ETF (HYGH), launched 5/29/14, is an actively managed fund-of-funds seeking to mitigate interest rate risk of a portfolio composed of U.S. dollar-denominated, high yield corporate bonds. It will hold iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and short positions in U.S. Treasury futures. The fund has an expense ratio of 1.15% that will be capped at 0.55% through February 2016 (HYGH overview).
- iSharesBond Dec 2016 Corporate Term ETF (IBDF), launched 5/29/14, provides exposure to investment grade corporate bonds that mature in 2016. IBDF’s expense ratio is 0.10% (IBDF overview).
- iSharesBond Dec 2018 Corporate Term ETF (IBDH), launched 5/29/14, will provide exposure to investment grade corporate bonds that mature in 2018. IBDH’s expense ratio is 0.10% (IBDH overview).
- PowerShares Multi-Strategy Alternative Portfolio (LALT), launched 5/29/14, is an actively managed ETF designed to achieve a positive total return with low correlation to the broad market. It will attempt to achieve its objective by investing in equities, financial futures contracts, forward currency contracts, and other securities. The fund has a 0.95% expense ratio (LALT overview).
Product closures/delistings in May:
- UBS AG ETRACS Fisher-Gartman Risk On ETN (ONN) [Lights Going Out For OFF and ONN]
- UBS AG ETRACS Fisher-Gartman Risk Off ETN (OFF)
Product changes in May:
- Market Vectors RVE Hard Assets Producers ETF (HAP) will change its name to Market Vectors Natural Resources ETF (HAP) effective May 1.
- ProShares suspended creation units for eleven ETFs effective May 2 due to regulatory delays involving registration amendments. Share creation was resumed on May 6.
Announced Product Changes for Coming Months:
- iShares Core Total U.S. Bond Market ETF (AGG) will be renamed iShares Core U.S. Aggregate Bond ETF (AGG0 effective June 3.
- Two iShares bond ETFs will change their names and underlying indexes becoming iShares Core Short-Term USD Bond ETF (ISTB) and iShares Core Long-Term USD Bond ETF (ILTB) effective June 3.
Previous monthly ETF statistics reports are available here.
Disclosure covering writer, editor, publisher, and affiliates: 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.