Last year, 205 exchange traded products debuted in the U.S., but in a sign of the increasingly competitive fight for investors’ attention assets, by late in the year, close to half 2014’s new ETFs had less than $10 million in assets under management.
To this point in 2015, the number of new ETFs is approaching 80, which says this will be a strong year for ETF launches though perhaps off last year’s pace.
“Often, ETP launches reflect a source of investment ideas. Providers attempt to address market trends, such as strong U.S. equity market valuations, still-murky visibility over the timing of U.S. interest-rate hikes, and plenty of questions about the macroeconomic picture overseas. To be sure, ETP launches can wind up as a trailing indicator, since it takes a minimum of several months between product registration and rollout, and by then, market conditions and investor sentiment may have changed,” said Morningstar analyst Robert Goldsborough in a recent note.
New ETFs often come with caveats, some of them nonsensical, such as waiting for the funds to gain assets and volume, two traits that act more as indicators of herd mentality than indicators of future performance. [Another Good Year for new ETFs]
As Morningstar notes, some of this year’s new ETFs have immediately flourished with the iShares Exponential Technologies ETF (NYSEArca: XT) being a prime example. A partnership between BlackRock’s (NYSE: BLK) iShares unit, the world’s largest issuer of exchange traded funds, and Ric Edelman’s Edelman Financial Services, one of the largest independent registered investment advisory firms, fostered XT’s launch and it is fair to say the ETF has been a success with almost $648 million in assets under managent less than two months after coming to market. [A new Exponential Tech ETF]
Among the other new ETFs that carries a relationship to a marquee name in the finance world is the SPDR DoubleLine Total Return Tactical ETF (NYSEArca: TOTL). The actively managed TOTL represents bond king Jeff Gundlach’s initial ETF foray.
“TOTL serves up a core fixed-income strategy and seeks to outperform the Barclays U.S. Aggregate Bond Index. At 0.55%, the ETF offers a less expensive way to benefit from Gundlach’s acumen than the 0.73% price tag for the retail share class of his DoubleLine Total Return Fund (DLTNX),” according to Morningstar. [Gundlach’s new Bond ETF]
Some new international ETFs have found quick success as well. The CSOP FTSE China A50 ETF (NYSEArca: AFTY), the first ETF to be listed independently in the U.S. by a Chinese asset management company, debuted in March and stands as a case study in the advantages of issuers seeding new ETFs before the funds come to market.
AFTY recorded the largest initial capital investment of more than $237 million in assets and 13.96 million shares, the largest initial investment among all U.S.-listed equity ETFs since 2007, according to CSOP. [New A-Shares ETF Comes to Town]
The WisdomTree Europe Hedged SmallCap Equity Fund (NYSEArca: EUSC) did not debut with a large, ready-made assets under management total, but the ETF had its own advantage. A simple way of describing EUSC is that is the small-cap answer to the WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ), this year’s top-asset gathering ETF.
Living in HEDJ’s shadow has been an advantage for EUSC as the latter has needed just two months on the market to accumulate almost $200 million in assets. [Right Place, Right Time for This new ETF]
SPDR DoubleLine Total Return Tactical ETF
Tom Lydon’s clients own shares of HEDJ.