With over 1,400
ETFs
and ETNs on the market today, it would appear that logical that
all the good ETF ideas have been exhausted. That means new
entrants to the game will be forced to copy previously existing
concepts, and even if that is done with the promise of lower
expense ratios, the first-to-market advantage is often too deep
to overcome for many rookie ETFs.
Saying that most, if not all of the good ETF ideas have been
used up in the industry's barely two decades of life is
one way critics articulate that the pace of new
ETF debuts has slowed in 2012
.
"Just" 160 new ETFs have debuted to this point in 2012, down
from 288 at the same juncture last year, the Wall Street Journal
reported citing Lipper data. Clearly that must mean all the good
ideas for new ETFs have been used up, right? Wrong. Here are some
potentially attractive niches with existing voids ETF sponsors
can fill in the years ahead. Just remember: These our ideas, not
theirs.
Restaurant ETF
Given the size and brand recognition of some publicly traded U.S.
restaurant operators, the fact this ETF does not already exist is
mind-boggling. There is no excuse because there is even
a restaurant index just waiting to be used
.
Think this concept would not work? Think again. Figure it this
way. Panera Bread (NASDAQ:
PNRA
) has nearly quadrupled in the past five years. Chipotle (NYSE:
CMG
) has more than doubled while Buffalo Wild Wings (NASDAQ:
BWLD
) has jumped over 170 percent. If the restaurant ETF had come
along even three years ago, investors likely would have been
treated to some stellar gains.
More Country ETFs
There is no denying investors love international ETFs,
particularly the emerging markets variety. And investors have
started to embrace
frontier markets as well
.
Given the popularity of ETFs tracking Brazil, China and plenty
of small emerging markets, one might think the market for global
funds is tapped out. Not really. That point can be illustrated in
the form of a trivia question. Did you know that 10 of the
world's 50 largest economies do not have a U.S.-listed
exclusively devoted to them? Sure, that group includes Venezuela
and Iran, which probably will not be getting ETFs anytime soon,
but it also includes the United Arab Emirates and the Czech
Republic, both of which stand as valid options for their own ETFs
down the road.
India Bond ETFs
Considering that India is the "I" in BRIC and the tenth-largest
economy in the world, the country does not issue bonds at pace
comparable to that of some other major economies. That coupled
with previously tight restrictions on foreign ownership of Indian
corporate and sovereign debt has made tapping the Indian bond
market difficult, particularly through ETFs.
The WisdomTree Asia Local Debt Fund (NYSE:
ALD
) offers a 5.6 allocation to India and that is the largest weight
to the country among U.S.-listed bond ETFs. Interestingly, India
just increased foreign ownership limits on its debt. The country
raised the limit on corporate bonds issued by non-infrastructure
companies by $5 billion to $25 billion and the total foreign
investment allowed in Indian bonds to $75 billion from $65
billion,
according to the Wall Street Journal
.
It might take a while, but it is not unreasonable to expect
the Indian debt market to become attractive to ETF sponsors in
the coming years.
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.
(c) 2012 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.