It is often said that new
are to be avoided until those funds reach certain assets under
management and volume thresholds. No, a new ETF should not be
treated like a hot technology IPO in 1997. That is to say being
involved with a rookie ETF on its first day of trading is not
However, the problem with waiting for certain AUM and/or
volume benchmarks to be reached is that the very folks that extol
such virtues offer no uniformity on the matter. Really, the only
thing that critics of new ETFs can agree on is these funds need
time to sit around gathering dust before investors should get
In many cases, waiting months upon months for new ETFs to
mature as if they are fine red wines proves to be the wrong move.
The waiting game means investors can miss out on capital
healthy dividends, too
The new ETFs featured here share some traits in common. All
have gathered impressive inflows to this point in their young
lives. By virtue of that fact, these ETFs look not only like
survivors, but funds with the potential to be quite successful.
Arguably, the most interesting characteristic shared by these
funds is that all debuted in September or later and they are
already showing signs of being winners.
PowerShares S&P 500 High Dividend Portfolio (NYSE:
Judging by returns (the fund has dropped 3.3 percent), the
PowerShares S&P 500 High Dividend Portfolio is a victim of
bad timing. October was a rough month for U.S. equities and with
SPHD making its debut on October 19, it is not surprising the ETF
has struggled a bit out of the gate.
Do not expect that phenomenon to last long. Not even three
full weeks old, SPHD has already raked in $12.3 million in assets
under management and it is easy to understand why. The popularity
of dividend ETFs is undeniable. So is the
popularity of low volatility funds
If SPHD were candy, it would be a Reese's Peanut Butter Cup.
Most investors love chocolate (dividends) and many love the low
volatility theme (peanut butter.) Now those two popular tastes
come together in one ETF.
WisdomTree China Dividend Ex-Financials Fund (NASDAQ:
If SPHD is suffering through a case of bad timing, then CHXF had
impeccable timing. The fund debuted around September 20 and
Chinese equities have been perking up since earlier that month.
CHXF's good timing is evident in its returns. Since September 20,
the ETF has jumped almost 6.7 percent.
There are risks with the ex-financials, particularly when that
sector performs well, which it is doing right now in China.
However, there are arguably more risks with Chinese banks than
there are rewards. Noted short-seller Jim Chanos remains bearish
on Chinese banks and Forbes recently ran an article
comparing Chinese banks to Enron
Clearly, some investors like the idea of investing in China
while taking a pass on banking shares. CHXF is not even two
months old and it already has almost $29.4 million in AUM.
FlexShares Morningstar Emerging Market Factor Tilt Index
The FlexShares Morningstar Emerging Market Factor Tilt Index ETF
is another example of a new ETF with some good timing. Coming to
market on October 1 was a wise idea, because within a few weeks,
analysts and investors started becoming more vocal about
about the compelling valuations
available in the developing world.
TLTE has a couple of interesting traits investors should
acknowledge. First, the fund offers ample exposure to large, mid
and small caps whereas most emerging markets ETFs of this nature
would be excessively weighted to large caps. Second, TLTE is not
overly risky at the country level. South Korea, Taiwan and Hong
Kong combine for over a third of the fund's weight. Now five
weeks old, TLTE has almost $20 million in AUM.
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