First it was Direxion saying it will shutter nine ETFs. Then it
was Scottrade scrapping the FocusShares ETF suite. Add in hints
that Russell Investments may do the same with its ETF lineup and it
is easy to see why
some folks are fretting about ETF closures
The result is an assumption by many that the current environment
is somehow toxic for new ETFs. In fact, an expert
quoted by Reuters
said, "it's no country for new funds."
Everyone is entitled to their own opinion and it is true that
the ETF landscape has become increasingly competitive. As iShares,
State Street Global Advisors and Vanguard control about $1 trillion
of the industry's $1.2 trillion in assets under management, it is
easy to assume to that there is little room for new funds to not
only survive, but thrive.
The assumption that new ETFs cannot attract robust asset hauls
is erroneous. In fact, some ETFs that have come to market over the
past year have done quite well and for the sake of this argument,
the PIMCO Total Return ETF (NYSE:
) will be excluded. Just six months old, the "Bill Gross ETF" is
home to over $2.4 billion in AUM, a stunning total for an ETF that
Not all new funds can be like BOND, but plenty of others are
doing pretty well when it comes to attracting assets.
WisdomTree Emerging Markets Corporate Bond Fund (NASDAQ:
) The WisdomTree Emerging Markets Corporate Bond Fund is one of the
funds that refutes the argument that these are tough time for new
funds. EMCB is a niche product that faces competition from iShares
and SPDRs products.
EMCB has dealt with that competition easily because it was the
first of the three emerging markets corporate debt funds to come to
market. The ETF has shown there is room for new ETFs to succeed by
attracting over $62 million in AUM since its March debut.
EMCB also dispels the notion of treating new ETFs like fine
cheese and wine. There has been no need to let EMCB mature. Sitting
on the sidelines with this ETF would have cost investors 3.5
percent in returns and a distribution yield of almost five
Market Vectors Preferred Securities ex Financials ETF (NYSE:
) Once again, a niche product dispels the notion that new ETFs
cannot catch investors' eyes. As is the case with EMCB, the Market
Vectors Preferred Securities ex Financials ETF is a yield play and
that is one reason the fund has raked in $30.5 million in AUM in
just one month of trading.
While REITs do account for almost 31 percent of PFXF's weight,
the ETF is the first to track preferred stocks that is not
excessively weighted to bank stocks. A net expense ratio of 0.4
percent means PFXF is also the least expensive preferred ETF to
hold and that is another trait that is probably helping this new
iShares MSCI Emerging Markets Minimum Volatility Index Fund
) Sure, one could say the only reason why the iShares MSCI Emerging
Markets Minimum Volatility Index Fund has been a success in 10
months of trading is because it is an iShares fund. Maybe that is
right, maybe that is wrong. The reason for EEMV's success is not as
important as just realizing the fund has hauled in almost $392
million in AUM in less than a year of trading.
EEMV, which has an expense ratio of just 0.25 percent, is up
almost 12 percent year-to-date. Again, another prime example that
shows thinking that some new ETFs are doing quite well.
SPDR Barclays Capital Short Term High Yield Bond ETF (NYSE: )
The SPDR Barclays Capital Short Term High Yield Bond ETF is one of
the more anonymous members of a sub-sector of the ETF universe that
gets plenty of attention. Or maybe it is fair to say that SJNK is
one of the biggest .
Either way, there is no getting around the fact that SJNK has
attracted almost $195 million in AUM since it debuted in March.
SJNK's 30-day SEC yield is nearly six percent.
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