Every month I peruse the excellent ETF Stats from Ron Rowland at InvestWithAnEdge.com. I then add a few interesting new ETFs to a spreadsheet to see how they do over time in terms of performance and gathering assets. Let’s go through a selected list of recent products shown in Exhibit 1. Just so we are clear what we are looking at – those are funds I personally found “interesting” enough to see how they do, in no way is it a recommendation to buy or sell any of them. Performance section compares how the ETF did since launch in absolute terms and then relative to a benchmark that I thought was most comparable. Note that most of them haven’t been on the market long enough for any meaningful conclusions, so it’s just a curiosity list.
Exhibit 1 – Selected New ETFs
- Income – it has been a popular theme with people looking for any income in this ultra-low rate environment. RISE had an unfortunate timing in their strategy – who knew in early 2015 that rates could go any lower! Somehow it still has $12 million in assets paying 1.5%. Jeff Gundlach’s DoubleLine has been playing with many new products including these active bond ETFs, which are doing ok. The other two are tactical fund of funds playing on momentum in different bond sectors – we’ll see how they do.
- Smart Beta – 2016 has been a year of smart beta with plethora of new launches. The ones I show are just a small sample. KEMP had an interesting idea of weighing emerging markets on GDP and not market cap. So far it hasn’t been very successful in gathering assets or beating the benchmark. There’s been many new multi-factor ETF and the performance of U.S. ones is “meh”, while international ones are doing better. CAPX has a questionable appeal as demonstrated by low AUM. And Guggenheim entry into a crowded Low Volatility space hasn’t gotten much attention either.
- Tactical – very questionable results here (as expected). FV made a big splash in its first few months, at one point beating benchmark by 15% since launch (Exhibit 2). Naturally, the fund was flooded with new assets (Exhibit 3) which was promptly followed by a bust in momentum strategies and declining AUM. It was good enough for Dorsey Wright to be acquired by Nasdaq for $225 million! The other tactical ETFs managed to gather decent AUM despite uninspiring performance.
Exhibit 2 – FV Performance Since Launch
Exhibit 3 – FV Asset Under Management
- Theme – now we come to the goofiest trend – thematic investment. It’s been around a long time with mostly mediocre results. I have two issues with this investment style: 1) just because it’s a growing theme doesn’t mean the companies involved are good investments as the excitement often leads to high valuations; 2) construction of these funds is such that the companies they hold often derive just a fraction of their revenues from said themes. Anyways, the success of HACK led to PureFunds launching a slew of very nichey funds focused on big data, mobile payment, drones & videogames. None have gathered much in AUM. Even more ambiguous are the funds focused on millennials, longevity, fitness, obesity, and organics. But look at the pretty graphics in Exhibit 4 Janus uses to promote their new funds (not on the list yet). And don’t even get me started on crowdsourcing and social media buzz ones!
Exhibit 4 – New Janus Funds Launched in June
You won’t see me buying any of these ETFs, but it’s good to keep an eye on the product trends for general knowledge. And I hope I don’t come across as a hater – hey, if you capitalize on being in the right place at the right time, I’m all for it – capitalism is a wonderful thing! Kudos to PureFunds with HACK and Dorsey Wright with FV and Nasdaq deal.
If anything, these traded funds makes it easier to track how various themes are actually doing in the real world. Although Motif Investing has been doing the thematic baskets for years and can be a more cost-effective and customizable way to invest if you are so inclined.