[This article appears in our December 2017 issue of ETF Report.]
More than 20 ETFs that launched during the first 10 months of 2017 have achieved assets under management of more than $100 million. What’s most notable about the largest launches of the year is the level of ownership by their own issuers or firms affiliated with their issuers.
The biggest winner this year so far has been the iShares Core MSCI International Developed Markets ETF (IDEV), which rolled out in March and currently has $713.4 million. The fund offers plain-vanilla exposure to non-U.S. developed markets for a low expense ratio of just 0.07%, only 1 basis point more than the cost of the $12.5 billion Schwab International Equity ETF (SCHF). It’s also cheaper than the $39.8 billion iShares Core MSCI EAFE ETF (EFA), which covers developed countries, except for the U.S. and Canada—charging 0.33%.
Typical of any major iShares launch, this fund has fairly diverse institutional ownership. However, that’s not the case for the rest of the top 10 launches of 2017. And while IDEV represents pure-beta exposure, that’s not so for the vast majority of the other funds comprising the top 10 launches.
The ETF industry as grown out of the plain-vanilla, cap-weighted era of broad asset class exposures and has entered a much more niche phase characterized by more complex strategies and more targeted sections of the markets.
The PowerShares Treasury Collateral Portfolio (CLTL) is a distant second to IDEV, with $454 million in assets under management gathered since its launch in January. However, based on the last available data, virtually all of that is held by the parent company of its issuer, Invesco Ltd. The fund covers ultra-short-term Treasury debt at an expense ratio of 0.08%. It’s designed for use by institutional and large investors that need a liquid vehicle for liquidity and
The Principal Active Global Dividend Income ETF (GDVD), which invests in global dividend-paying stocks, made its debut in May and currently has $453.5 million in assets. The bulk of that accumulated to the fund shortly after its launch, and as with CLTL, the issuer holds most of the fund’s assets. Principal has said that it often launches funds it knows it will use in its own asset allocation strategies, so that’s not exactly a surprise. GDVD comes with an expense ratio of 0.58%.
The DeltaShares S&P 500 Managed Risk ETF (DMRL) is in the No. 4 spot, despite having just launched in August. The ETF was part of a four-fund rollout by Transamerica when it entered the ETF market. The fund has $405.1 million in AUM.
Per WhaleWisdom.com, the bulk of that is held by Milliman Financial Risk Management, DMRL’s subadvisor. DMRL allocates among equity, fixed income and cash, depending on volatility and correlations, with the intention of limiting volatility and downside risk. It costs 0.35%.
The DeltaShares S&P International Managed Risk ETF (DMRI) is in the No. 6 spot, with $240.8 million, and like DMRL, is primarily owned by Milliman. DMRI charges an expense ratio of 0.50%.