A prominent theme among ETF industry observers from 2012 has,
unfortunately, remained in play in 2013. That being the ongoing
attacks on, criticism of and fear-mongering pertain to
with small assets under management tallies and low average daily
Incorrect interpretations of ETF liquidity have started to
border on dangerous. For example, one noted commentator recently
said he prefers the iShares MSCI Japan Index Fund (NYSE:
) over the WisdomTree Japan Hedged Equity Fund (NYSE:
has been noted
, that deeply flawed logic has proven costly.
DXJ itself is large with over $3.6 billion in AUM and robustly
traded with average daily turnover north of 1.9 million shares.
In other words, it is not the type of ETF experts would tell
investors to stay away from on the basis of size.
Still, just as some banks are "too big to fail," many
professional and retail investors see some ETFs as "too small to
embrace." In this case, it pays to remember the famous quote from
the late New York Senator Daniel Patrick Moynihan "You are
entitle to your own opinion, but you are not entitled to your own
Fact is over 140 ETFs and ETNs have delivered year-to-date
returns of 10 percent or more, according to Finviz data. Plenty
of members of that group are well-known, heavily traded names
such as DXJ and the iShares Dow Jones US Home Construction Index
). Others are not. Here are a few examples of what assets/volume
crowd have missed out on in 2013.
SPDR S&P Transportation ETF Yes, the popular iShares Dow
Jones Transportation Average Index Fund (NYSE:
) has a rival and it is the unheralded SPDR S&P
Transportation ETF. To be fair, XTN is up just under 10 percent
year-to-date with a gain of 9.87 percent, but that is good enough
to be about 80 basis points ahead of IYT.
XTN is home to more stocks with 38 compared to 21 for IYT and
that means the SPDR fund is home to smaller transportation
However, the two funds
have many of the same holdings
, but IYT still has average daily volume that is about 100 times
that of XTN's. Still, long-term investors should note XTN has
been the better performer over the past two years and it is the
cheaper of the two ETFs with an expense ratio of 0.35 percent
compared to 0.46 percent for IYT.
iShares Dow Jones U.S. Broker-Dealers Index Fund (NYSE:
) With scores of ETFs tracking the financial services sector on
the market today, it is not surprising that a few go overlooked.
Such is life for the iShares Dow Jones U.S. Broker-Dealers Index
On the surface, IAI is an ETF the critics should love to hate.
It has just $71.2 million in assets under management, a small sum
for an ETF that is nearly six years old, and it trades less than
42,000 shares per day.
A deeper look shows it is hard to call IAI an "illiquid" ETF.
Of the ETF's top-10 holdings, which represent over 59 percent of
its weight, Raymond James (NYSE:
) is the least heavily traded with average daily turnover of
almost 651,000 shares. Ignoring IAI's underlying liquidity means
investors have missed out on an almost 16 percent year-to-date
PowerShares Energy Exploration & Production Portfolio
) The PowerShares Energy Exploration & Production Portfolio
is a dichotomy of sorts. With nearly $107 million in assets, it
meets the much lauded $100 million in AUM watermark that so many
folks look for. On the other hand, PXE's average daily volume is
less than 47,000 shares.
With an expense ratio of 0.65 percent, PXE is pricier than
larger rivals such as the Vanguard Energy ETF (NYSE:
) and the Energy Select Sector SPDR (NYSE:
). However, PXE
has a penchant for outperforming those ETFs
Over the past two years, PXE has surged almost 21 percent,
giving the fund a stunning out-performance over XLE and VDE.
That trend has continued in 2013 as PXE is up nearly 14
percent. VDE is higher by just 7.1 percent.
For more on ETFs, click
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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