With over 670 new ETFs in filings with the SEC and more being
filed every week, there are bound to be a number of duds. Still,
there are a few exciting funds in the pipeline I'm keeping an eye
Last week, I blogged about fund closures and came up with a list
of surprising fund closures. With so many niche markets and
strategies already covered, the chances of success are becoming
increasingly slim for issuers.
As expected, the recent wave of new fund launches has brought
its fair share of yawners-I won't even single out any funds here,
because there are simply so many. Some launches look like "Hail
Mary" attempts, while others look promising, only to go unnoticed,
collecting dust and few assets.
Simply put, I think ETF investors are getting "launch fatigue"
and harder to impress.
But as I said, some in registration look interesting. When I say
'interesting,' I mean some have blockbuster potential, while others
are the first of their kind and I have no idea how the investing
public will respond.
For example, one filing on my radar with blockbuster potential
is the iShares MSCI Frontier 100 Index Fund (NYSEArca:FM), which
looks to be launching soon.
This will be the first global frontier markets ETF to hold local
shares and will include frontier countries such as Kuwait, Qatar,
Vietnam, Pakistan, Nigeria and Kazakhstan. The other global
frontier ETF, the Guggenheim Frontier Markets ETF (NYSEArca:FRN),
is severely limited in scope, holding only depositary receipts.
Going out on a limb, I'd say FM should be a sort of frontier
markets equivalent to the $33 billion iShares MSCI Emerging Markets
Index Fund (NYSEArca:EEM).
While we're on the subject of emerging markets, I wouldn't be
surprised to see the Global X Next 11 ETF (NYSEArca:NXTE) to launch
in the near future.
The "next eleven" are a combination of 11 emerging and frontier
countries considered by Goldman Sachs' Jim O'Neill-made famous for
coining the acronym BRIC back in 2001-to have higher-than-average
growth potential in the coming decades.
While I'm not sure how the markets will respond to this launch,
it's the first of its kind and an interesting theme.
Merk's Hard Currency, The ETF Version
Merk Investments' ETF version of its flagship mutual fund, the
Merk Hard Currency Fund (
), is another launch I'm excited about. This actively managed fund
will target currencies of countries with sound monetary policies to
protect investors against a downside move in the dollar.
The Merk Hard Currency ETF (NYSEArca:HRD) will also have an
allocation to gold, which makes the fund more than a simple
currency product. In our current zero-interest rate environment and
the odds for QE3 increasing, I'm thinking I'm not alone in finding
this fund interesting.
MERKX currently has $500 million in assets, so we'll see how the
ETF version does. HRD might also get some competition from Pimco
and US Commodity Funds, which have their own currency strategy ETFs
in filings-the Pimco Foreign Currency Strategy ETF and the U.S.
Golden Currency Fund (NYSEArca:HARD).
While we're discussing Pimco, another fund worth watching on
their filings list is the Pimco Real Return ETF, another actively
managed fund that looks to use a mix of fixed-income securities
from around the globe, for a real return strategy.
Where's The Second-Tier EM ETF?
Before diving into my list, I want to reiterate my shock that
there's no ETF filing for a "second tier" emerging markets ETF.
I've blogged about this before.
Second-tier emerging markets would be those countries seen
toward the bottom of EEM and its competitor, the Vanguard MSCI
Emerging Markets ETF (NYSEArca:VWO). These countries get
overshadowed by the larger markets and get no love.
They are categorized as the "others," according to iShares' EEM
fact sheet, and include fast-growing smaller emerging markets
countries like Indonesia, Thailand, Chile, Turkey, Poland, Colombia
and the Philippines.
Wouldn't a straight cap-weighted fund incorporating these
second-tier emerging markets under a single ETF wrapper have a
strong investor base? Each of these countries mentioned has
single-country-exposure ETFs listed. When their assets are
combined, they currently have over $2.7 billion under
It's something to think about, and for my money, if there were a
second-tier emerging markets ETF in filing, it would be No. 1 on my
list, hands down.
The 10 Top Upcoming Launches
10. IQ Physical Diamond Trust - For filing details, see my
colleague Ana Kostioukova's blog.
9. CurrencyShares Singapore Dollar Trust
8. JP Morgan Physical Copper Shares ETF
7. Global X Next 11 ETF (NYSEArca:NXTE)
6. Global X Sri Lanka ETF
5. iShares MSCI Vietnam Investable Market Index Fund
4. Guggenheim China Consumer ETF (NYSEArca:RAO)
3. Pimco Real Return ETF
2. Merk Hard Currency ETF (NYSEArca:HRD)
1. iShares MSCI Frontier Markets ETF (NYSEArca:FM)
At the time this article was written, the author had no
positions in the securities mentioned.
Contact Dennis Hudachek at email@example.com.
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