6 Small ETFs with Big Returns
September 15th, 2010 at 1:00pm by Tom Lydon
Exchange traded fund (ETF) investors may tick off a list of well-known and heavily traded big-name ETFs, but there are plenty of smaller ETFs that have been doing quite well, too. Here are a few small ETFs with $50 million or less in assets that have performed well over the last six months.
Emerging Market Banks. Developing market banks are now well-capitalized and well-funded, while enjoying rapid growth. In terms of profits, dividends and market value, developing banks now account for up to half of the global banking industry. However, emerging market banks will need more capital than their retained profits can generate in order to meet the demands of rapid credit growth and its associated bad debt. [Emerging Market Bank ETFs Emerge Stronger After Crisis.]
- iShares MSCI Emerging Markets Financials (NASDAQ: EMFN): up 7.7% in the last six months
- EGShares Emerging Markets Financials (NYSEArca: EFN): up 8% in the last six months
REITs. Even as the real estate sector continues to get beat up and property values sink, real estate investment trust ETFs have continued to pull their weight in the markets over the last year. REITs have boosted their balance sheets by raising money through secondary offerings and IPOs in 2009 and this year. Furthermore, REITs were boosted with an upgrade from Fitch ratings from negative to stable. Industrial REITs were the only subsector to remain rated negative. [Why REIT ETFs Are Outperforming the Market.]
- Wilshire U.S. Real Estate Investment Trust Index ETF (NYSEArca: WREI): up 10.3% in the last six months
- iShares FTSE NAREIT Retail (NYSEAca: RTL): up 7% in the last six months
Treasury Bonds. The global economy has suffered and the effects still linger. Those hurt by the recent volatility in the stock market and ETFs opted to invest in the relative safety of government bonds. Further fueling the demand for Treasuries, the Fed is now buying in bulk. Interest rates have been at record lows for more than a year, and as long as the economy is down, they could be staying that way. Sooner or later, though, the Federal Reserve will raise them. When that happens, bond prices will fall and yields will rise, leaving the trillions in them at risk. [Short ETFs: An Option for a Bursting Bond Bubble.]
Recently, Federal Reserve Chairman Ben Bernanke stated that the economy is facing “unusually uncertain” prospects, which may keep inflation and interest rates suppressed for a while.
- PIMCO 7-15 Year U.S. Treasury Index (NYSEArca: TENZ): up 7.8% in the last six months
- PIMCO 25+ Year Zero Coupon U.S. Treasury (NYSEArca: ZROZ): up 20% in the last six months
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.