ETF Trends
ETF Trends

So many sector exchange traded funds, so little time. That is a fair assertion because the number of sector and industry ETFs has continued expanding over the years.

In late 2013, Fidelity entered the sector ETF space with 10 new products, which at the time were the lowest cost sector ETFs on the market. Fidelity’s sector suite has since swelled to over $2 billion in assets under management. As of Dec. 26, there was $311.1 billion allocated to sector ETFs with energy ETFs accounting for $44.7 billion of that total, according to Bloomberg. [Investors Flock to Energy ETFs]

The space is also highly competitive as highlighted by Vanguard’s recent decision to lower fees on its 10 sector ETFs to 0.12%, moving the issuer into a tie with Fidelity for the distinction of sponsoring the least expensive sector funds. [Vanguard Lowers Fees Again]

Indecisive sector ETF investors have options as well, including an increasing number of ETF of ETFs, such as the Global X | JPMorgan US Sector Rotator Index ETF (NYSEArca: SCTO). SCTO debuted in October and came to market with a 61% weight to the iShares Barclays 1-3 Year Treasury Bond Fund (NYSEArca: SHY), but true its rotator roots, SCTO has dropped SHY and now holds five ETFs: TheSPDR Dow Jones REIT ETF (NYSEArca: RWR), Consumer Discretionary Select Sector SPDR (NYSEArca: XLY), Financial Select Sector SPDR’s (NYSEArca: XLF), Industrial Select Sector SPDR (NYSEArca: XLI) and the Utilities Select Sector SPDR (NYSEArca: XLU).

SCTO’s index “rebalances monthly to reflect changing market conditions by tracking the performance of a portfolio of one to five ETFs selected out of a pool of ten U.S. sector ETFs and a U.S. treasury bond ETF. The sectors represented by the U.S. sector ETFs are: consumer discretionary, consumer staples, energy, financials, healthcare, industrial, utilities, materials, technology and real estate,” according to Global X.

SCTO charges 0.86% per year. That expense ratio is somewhat high among ETFs, but favorable when compared to the fees charged by many of the companies that run ETF managed portfolios, a group that the new Global X/JP Morgan ETFs are looking to compete with.

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