ETF assets moved closer to crossing the $2 trillion threshold, but they haven’t accomplished the task yet. Finishing the month at $1,979,993,748,006 means it will only take a 1% increase in December to end the year above this significant level. Through a combination of inflows and market gains, industry assets grew 3.8% in November and 16.7% year-to-date.
A dozen new ETFs came to market in November, while sponsors delisted and liquidated five products. The net increase of seven puts the month-end product count at 1,659 (1,450 ETFs and 209 ETNs). There have been 190 product introductions so far in 2014 and 67 closures. Four of this year’s launches have already closed and won’t show up on any year-end roster.
Actively managed ETFs have made great strides in 2014, at least in the quantity available. Four new actively managed ETFs rolled out in November, bringing the count to 118. The year began with only 71, putting the growth at 66%.
Asset managers are trying to expand the definition of ETFs to include nontransparent funds. Fortunately for investors who have embraced the transparency inherent in today’s ETF offerings, the recent attempts at allowing nontransparent ETFs have failed.
In October, the SEC put the kibosh on a nontransparent ETF proposal that utilized a blind trust to keep portfolio holdings secret from investors. However, the SEC stopped short of claiming that nontransparency was directly responsible for the denial. Instead, it claimed the inability for market makers to maintain a trading price close to the fund’s NAV (due to the nontransparency) was the primary reason.
Then in November, most financial media outlets incorrectly proclaimed the SEC’s approval of Eaton Vance’s ETMF structure was a stamp of approval for nontransparent ETFs. However, that is patently false as the SEC ruling specifically forbids these new-fangled products to be marketed as ETFs. Instead, they are exchange traded managed funds, a new structure that is more mutual fund than anything else. ETMFs do not trade during the day like ETFs, and like mutual funds, buyers will not know how much they paid per share until after the market closes.
The number of trading days fell from 23 in October to just 19 in November, a 17% drop. Therefore, it is not surprising for the monthly dollar volume to decline. However, given the abnormally large spike of trading activity in October, November’s tally came in 51% lower at $1.14 trillion. Seven ETFs averaged more than $1 billion per day, and these seven captured 48.3% of the notional amount traded.
The number of funds with more than $10 billion in assets decreased from 43 to 42 and hold 56% of all ETP assets. Products above $1 billion grew from 241 to 244 and account for about 89% of assets. The cumulative assets of the 841 smallest products account for just 1% of industry assets, and it takes the 1,399 smallest products (84%) to equal the assets of SPDR S&P 500 (SPY). The monthly turnover ratio (total dollar volume / assets under management) plunged from 1.22 in October to just 0.57 in November.
|November 2014 Month End||ETFs||ETNs||Total|
|Currently Listed U.S.||1,450||209||1,659|
|Listed as of 12/31/2013||1,332||204||1,536|
|New Introductions for Month||12||0||12|
|Delistings/Closures for Month||3||2||5|
|Net Change for Month||+9||-2||+7|
|New Introductions 6 Months||101||10||111|
|New Introductions YTD||178||12||190|
|Net Change YTD||+118||+5||+123|
|Actively-Managed Listings||122 (+4)||n/a||122 (+4)|
|Assets Under Mgmt ($ billion)||$1,953||$27.4||$1,980|
|% Change in Assets for Month||+3.9%||-2.2%||+3.8%|
|Qty AUM > $10 Billion||42||0||42|
|Qty AUM > $1 Billion||239||5||244|
|Qty AUM > $100 Million||739||37||776|
|% with AUM > $100 Million||51.0%||17.7%||46.8%|
|Monthly $ Volume ($ billion)||$1,107||$31.5||$1,138|
|% Change in Monthly $ Volume||-50.6%||-67.1%||-51.3%|
|Avg Daily $ Volume > $1 Billion||7||0||7|
|Avg Daily $ Volume > $100 Million||73||3||76|
|Avg Daily $ Volume > $10 Million||278||9||287|
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 November (sorted by launch date):
- Cambria Global Momentum ETF (GMOM), launched 11/04/14, is an actively managed fund-of-funds investing in equities, fixed income, real estate, commodities, and currencies. The fund uses measures of trailing momentum and trend to select 16 funds from a target universe of 50 ETFs it considers the most liquid, least expensive, and most representative. The fund will maintain the ability to invest in cash and bonds during unfavorable markets. GMOM has a 0.94% expense ratio (GMOM overview).
- First Trust Emerging Markets Local Bond ETF (FEMB), launched 11/05/14, is an actively managed fund that will hold at least 80% of its net assets in local currency-denominated bonds, notes, bills, certificates of deposit, time deposits, commercial paper, and loans from issuers in emerging market countries. The fund will use foreign currencies and derivative instruments to hedge interest rate and currency risks. No yield information is provided. The fund sports a 0.85% expense ratio (FEMB overview).
- First Trust International IPO ETF (FPXI), launched 11/05/14, provides exposure to IPOs and spin-offs in both emerging and developed countries during their first 1,000 trading days. The underlying index ranks potential constituents by market capitalization, and the 50 largest international companies are selected. Hong Kong and China have the largest allocations at about 17% each. Investors will pay 0.70% annually to own this fund (FPXI overview).
- First Trust Low Duration Mortgage Opportunities ETF (LMBS), launched 11/05/14, is an actively managed fund that will invest at least 80% of its net assets in investment grade, mortgage-related debt securities and other mortgage-related instruments tied to residential and commercial mortgages. The fund targets an average effective duration of 3 years or less. While the fund states its primary objective is to generate current income, no yield information was found. The fund sports a 0.65% expense ratio (LMBS overview).
- JPMorgan Diversified Return International Equity ETF (JPIN), launched 11/07/14, will provide broad exposure to developed market equities outside of North America. Securities selected for the index go through a ranking process evaluating value, size, momentum, and low volatility factors. The fund will seek to allocate risk equally across 40 regional sectors. The ETF will cap its expense ratio at 0.43% until 3/1/16 (JPIN overview).
- PowerShares DB Optimum Yield Diversified Commodity Strategy Portfolio (PDBC), launched 11/07/14, is an actively managed fund that is composed of futures contracts on 14 heavily traded commodities across the energy, precious metals, industrial metals, and agriculture sectors. The ETF will utilize an offshore subsidiary, allowing it to issue 1099s instead of K-1s. The fund’s expense ratio is capped at 0.59% until 2/29/16 (PDBC overview).
- Market Vectors ChinaAMC China Bond ETF (CBON), launched 11/11/14, is taking advantage of the relaxed restrictions on investments in China and will provide exposure to fixed-rate, RMB-denominated bonds that are issued in People’s Republic of China by Chinese credit, governmental, and quasi-governmental issuers. Distribution frequency should be monthly, but no yield information is noted on the website. The ETF’s expense ratio is capped at 0.50% until 9/1/16 (CBON overview).
- PureFunds ISE Cyber Security ETF (HACK), launched 11/12/14, invests in a portfolio of companies that provide hardware, software, and services designed to enhance cyber security. Companies in the underlying index are identified as either infrastructure or service providers. There are currently 30 holdings, with about 90% classified as infrastructure and 10% as service. Investors will pay 0.75% annually to own this fund (HACK overview).
- Emerging Markets Internet and Ecommerce ETF (EMQQ), launched 11/13/14, focuses on internet and ecommerce companies in emerging markets. The fund currently holds 42 stocks in eight countries, with the lion’s share of the allocation belonging to China at about 65%. The index-based fund sports a 0.86% expense ratio (EMQQ overview).
- FlexShares Credit-Scored US Corporate Bond Index Fund (SKOR), launched 11/13/14, will invest in intermediate maturity corporate bonds, and the underlying index’s selection criteria includes a credit scoring methodology. The proprietary credit-score seeks to identify companies that display strength in management efficiency, profitability, and solvency. Distributions are expected monthly, and the current yield to investors is estimated at 2.3%. The fund’s expense ratio will be capped at 0.22% until 11/3/15 (SKOR overview).
- Global X China Bond ETF (CHNB), launched 11/19/14, is another ETF taking advantage of the relaxation of investment restrictions in China and will provide exposure to RMB-denominated bonds that are issued or distributed within the mainland. Bonds included in the underlying index will be issued by governments, agencies, or Central State-Owned Enterprises. They will have a minimum maturity of one year and at least RMB 1 billion in outstanding principal. Distributions are expected monthly, but no yield information is provided. CHNB’s expense ratio will be capped at 0.50% until 11/19/15 (CHNB overview).
- SPDR MSCI ACWI Low Carbon Target ETF (LOWC), launched 11/26/14, seeks to provide after-fee results that correspond to the performance of the MSCI ACWI Low Carbon Target Index. The index is designed to reflect a lower carbon exposure than that of the broad market by overweighting companies with low carbon emissions relative to sales and per dollar of market capitalization. Investors will pay 0.30% annually to own this fund (LOWC overview).
Product closures/delistings in November:
- VelocityShares EmergingAsiaDR ETF (ASDR)
- VelocityShares EmergingMarkets DRETF (EMDR)
- VelocityShares Russia DRETF (RUDR)
- Barclays ETN+ S&P 500 3x Long B ETN (BXUB)
- Barclays ETN+ S&P 500 2x Long C ETN (BXUC)
Product changes in November:
- ProShares performed reverse splits on 10 ETFs effective November 6.
- First Trust Enhanced Short Maturity ETF (FTSM) had a 1-for-2 reverse split effective November 10.
Announced Product Changes for Coming Months:
- Russell plans to close its last remaining ETF, the actively managed Russell Equity ETF (ONEF), with its last day of trading on January 26, 2015. Russell closed its other 25 ETFs more than two years ago (October 2012).
Previous monthly ETF statistics reports are available here.