These Overlooked New ETFs Could be Diamonds in the Rough
August 18th, 2012 at 6:00am by Tom Lydon
Investors have plenty of choice when it comes to ETFs but sometimes get overwhelmed by the sheer number of offerings. And with so many new products hitting the market, some good ETF ideas may fall through the cracks.
Investment researcher Morningstar recently recommended five new ETFs that may be overlooked by investors but are worth consideration.
“We think it’s worthwhile to highlight an additional five ‘unloved’ ETFs that have debuted in the past year–ones that for whatever reason have not yet caught on with investors. Not surprisingly, some of these ETFs also cover areas where much in the way of ETF investor dollars has been directed in recent months–corners such as lower-volatility stocks, dividends, high-yield debt, and emerging-markets debt,” Robert Goldsborough wrote on Morningstar.
The following five funds are small when it come to assets, with low trading volume. The ETFs mentioned are best used in a diversified portfolio for accessing corners of the market, not as a core holding, Morningstar notes:
- PowerShares Fundamental investment Grade Corporate Bond Portfolio (NYSEArca: PFIG) With $20 million in assets and a 0.22% expense ratio, PFIG has a high-quality portfolio. Investment grade corporate bonds can be accessed with this fund at a reasonable price.
- PowerShares S&P International Developed Low Volatility Portfolio (NYSEArca: IDLV) The ETF has the same stocks that the popular SPLV carries with the low price of 0.25%. IDLV, which holds the 200 least volatile stocks in an index of companies from developed-markets countries other than the U.S., has struggled to attract assets, with just $11 million in investment. [Using Low Volatility ETFs to Endure Market Swings]
- SPDR Bof A Merrill Lynch Crossover Corporate Bond ETF (NYSEArca: XOVR) XOVR offers investors the opportunity to take advantage of price pressure that takes place when bonds are being upgraded to investment-grade or downgraded to high-yield. The fund tracks a BofA Merrill Lynch index and has a modified adjusted duration of 5.6 years and a 30-day SEC yield of nearly 4%. The expense ratio is 0.30%.
- iShares MSCI India index(NYSEArca: INDA) This fund is the least expensive India-focused ETF, and it has a mere $18 million in assets. Volume is low, but the fund is a good proxy to the Indian stock market. [India ETFs Rise on Interest Rate Cut]
- QuantShares US Market Neutral Value ETF(NYSEArca: CHEP) Investors may find this market-neutral strategy an attractive way to diversify a portfolio, because it could be expected to have a very low beta to the equity market and very low volatility. The high turnover and 0.81% expense ratio could be keeping this fund from getting going. [Market Neutral ETFs Outperforming in 2012]
Tisha Guerrero 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.