Niche ETF Offerings

Generic, plain vanilla, beta indexing exchange traded funds have etched out a significant portion of the $1.4 trillion ETF industry. Consequently, new ETF providers have been moving into more specialized or niche areas to gain an edge.

Over a third of the ETF industry’s total assets are in the ten largest products. Around $19 billion in new inflows went into the top 21 asset-gathering funds this year, writes Brendan Conway for Barron’s. [What the ETF Flows Show: Risk Dial Still On]

While investors are pouring more money into ETFs, especially in the largest offerings, ETF sponsors are looking to expand into less populated areas of the market.

For instance, three new ETFs and two exchange traded notes, including high-yielding master limited partnerships, a bet on gold with an options strategy, a “forensic accounting” fund and actively managed bond ETF, reveal the direction the overall industry is heading. The new funds include:

  • Global X Junior MLP ETF (NYSEArca: MLPJ)
  • iPath S&P MLP ETN (YSEArca: IMLP)
  • Credit Suisse Gold Shares Covered Call ETN (YSEArca: GLDI)
  • Forensic Accounting ETF (YSEArca: FLAG)
  • WisdomTree Global Corporate Bond ETF (YSEArca: GLCB)

Fund sponsors are also becoming more interested in actively managed ETF offerings, with mutual fund providers like Fidelity Investments, T. Rowe Price and Franklin Templeton eying the space. McKinsey consultant Pooneh Baghai projects active ETFs will grow faster than their passive counterparts and accumulate $500 billion by 2020.

Nevertheless, with more ETF products to choose from and most of the new inflows going into the biggest funds, Rob Ivanoff of ETF Business Review anticipates an increasing number of ETFs to shut down over 2013 as closures keep pace with new product launches.

For more information on new fund products, visit our new ETFs category.

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.