MOST INNOVATIVE NEW ETF (TIE)
WINNER: Breakwave Dry Bulk Shipping ETF (BDRY)
WINNER: Innovator S&P 500 Buffer ETFs (Series) (BJUL)
Innovation in ETFs can come in many forms, and in 2018, it came in the form of new and novel access. And it happens more often than you’d think. The award for most innovative ETF of 2018 ended up a tie between two products.
It may seem difficult to get excited about the Breakwave Dry Bulk Shipping ETF (BDRY), which is tied to dry bulk freight, but thanks to BDRY, any investor with a brokerage account can now access a segment of the market that’s key to the global commodity space.
Dry bulk freight refers to the transportation of dry cargo such as grain and iron ore. BDRY is an index-based portfolio that invests in near-dated freight futures contracts on three dry bulk indices, offering investors a good proxy for dry bulk shipping rates. However, it’s not exactly cheap, with an expense ratio of 3.09%.
The other most innovative ETF is the Innovator S&P 500 Buffer ETF - July (BJUL)—one of the first in a series of similar ETFs designed with downside protection in mind. BJUL is an actively managed ETF that offers access to the price return of the S&P 500 while capping gains and limiting potential losses in a so-called buffer strategy.
What makes BJUL and this entire series innovative is the extensive use of FLEX options to deliver a defined outcome to investors in a way only previously really available in structured products and annuities.
BEST NEW U.S. EQUITY ETF
WINNER: Vanguard ESG U.S. Stock ETF (ESGV)
ESGV offers socially responsible investing in a uniquely Vanguard package. With over 1,500 stocks, the ETF boasts broad diversification at a price point of just 0.12%, making ESGV at its launch the cheapest ESG U.S. equity ETF on the market (and one of the cheaper total U.S. market ETFs, period).
The result is a dirt-cheap total market fund with performance nearly identical to that of Vanguard’s $108 billion Vanguard Total Stock Market ETF (VTI), but without any of the stocks that give ESG-minded investors pause. So rather than having to choose between principles and performance, investors could use ESGV as a replacement for some or all of their existing VTI allocation, headache-free.
When Vanguard enters a space, investors usually pay attention. In less than six months on the market, ESGV has already passed $165 million in assets, making it one of the largest socially responsible ETFs, and one of the fastest-growing.
If anybody could make ESG investing go mainstream, it’s Vanguard. We’re eager to see if ESGV lives up to that potential.