ETF OF THE YEAR
WINNER: ARK Innovation ETF (ARKK)
The choice for ETF of the Year for 2020 is hardly surprising. It and its issuer dominated the financial news the entire 12 months, and it finished the year with a breath-stealing return of more than 150%.
It also trades an average of roughly $1.8 billion a day, putting it in the top 10 of U.S.-listed ETFs. That winning ETF is the ARK Innovation ETF (ARKK).
ARKK is the jewel in the crown of Cathie Wood’s lineup of funds focusing on disruptive innovation. In fact, it could be described as rather a “best ideas” fund, as it covers the themes of ARK’s other disruptive innovation ETFs, including ones that launched after ARKK’s debut in 2014. Accordingly, the actively managed fund’s mandate encompasses artificial intelligence, autonomous vehicles, fintech, DNA sequencing, robotics and 3D printing.
At the end of March, the top companies in the ETF included Tesla, Square, Teladoc, Roku and Zillow—a mix that reflects the wide latitude ARKK has to pursue disruptive innovation themes. But despite its broad mandate, the fund holds a fairly concentrated portfolio of around 50 stocks.
But that illustrates the devotion of ARKK’s managers to research-driven active management. ARK Invest, the firm behind ARKK and its sister funds, is known for its rigorous research and how it communicates that research to its investor base. ARKK’s issuer is all in on getting its ideas across to the public. Its research area on its website includes podcasts, white papers, webinars, videos and articles in abundance.
BEST NEW ETF & BEST NEW U.S. EQUITY ETF
WINNER: Invesco NASDAQ Next Gen 100 ETF (QQQJ)
The Invesco QQQ Trust (QQQ) is a long-standing staple in the ETF ecosystem, boasting nearly $155 billion in assets gathered over two decades. Its new sibling, the Invesco NASDAQ Next Gen 100 ETF (QQQJ), is its clever following act.
The new fund, launched in October 2020 as part of a pair (the other being the so-called mini QQQ or the Invesco NASDAQ 100 ETF (QQQM)) is essentially a feeder strategy for QQQ. QQQJ invests in the 100 stocks—excluding financials—that are next in line to enter the Nasdaq-100 Index, the benchmark underlying QQQ.
This next generation of the “Q’s” is in some ways more than a bit late to the game given how successful QQQ has been in the 21 years since it came to market. Yet QQQJ’s launch was surprisingly timely—if not flat out lucky—by offering another vector into the Q’s tech-related appeal in a year when investors couldn’t get enough of technology and growth names.
Like QQQ, newcomer QQQJ carries a perceived legacy of being a technology fund. But like its older sibling, it isn’t that; it’s merely an equity strategy that excludes financial stocks and ends up with a heavy allocation to tech names by default. QQQJ is nearly half allocated to the next wave of technology names bound for the Nasdaq-100.
The fund was an asset-gathering success right out of the gate, growing quickly, and crossing the $1 billion asset mark less than five months since it launched. That pace puts QQQJ among some of the most successful ETF launches ever—quite a feat for a new equity fund.
BEST NEW INTERNATIONAL/GLOBAL EQUITY ETF
WINNER: Dimensional International Core Equity Market ETF (DFAI)
The entry of Dimensional Fund Advisors into the ETF market was widely anticipated for years, but it was only after the implementation of the ETF Rule that the firm made the move. The Dimensional International Core Equity Market ETF (DFAI) was one of three ETFs to roll out from the storied mutual fund issuer last year.
DFA’s approach is generally buy and hold, and it invests in broad asset classes and tilts the weightings of individual securities based on their exposure to the size, profitability and value factors. The fund holds roughly 2,600 securities, with Japan representing nearly a quarter of the fund, the U.K. at nearly 13% and Canada at roughly 10% of the portfolio as of the end of March.
The issuer has been known for its exclusivity, requiring rigorous continuing education for the advisors approved to sell its funds. That made its mutual funds somewhat difficult for the average investor to access if they weren’t working with an advisor who was authorized to sell the funds. However, with the ETF available, anyone can access it—and at a lower cost, given that a similar DFA mutual fund with $30 billion in assets charges an expense ratio of 0.28%.
DFAI was one of the most-talked-about launches of 2020, and delivers the coveted Dimensional investment strategy to investors in a brand new wrapper at an even lower price.
BEST NEW U.S. FIXED INCOME ETF
WINNER: Vanguard ESG U.S. Corporate Bond ETF (VCEB)
The Vanguard ESG U.S. Corporate Bond ETF (VCEB) isn’t the first corporate bond ETF to use environmental, social and governance criteria (ESG) to choose which issues to hold. In fact, it came to market more than three years after the current leader in the space, the $836 million iShares ESG Aware USD Corporate Bond ETF (SUSC).
But this is Vanguard we’re talking about. The company’s first foray into the ESG fixed income markets checks all the boxes for investors looking for comprehensive, low-cost exposure to this burgeoning asset class.
It’s not hard to see why VCEB was awarded the title of “Best New U.S. Fixed Income ETF” of 2020. The awards committee liked that VCEB only charges 0.12% per year, lower than the 0.18% expense ratio for the aforementioned SUSC, and a reasonable premium to Vanguard’s vanilla corporate bond product, the Vanguard Total Corporate Bond ETF (VTC), with its 0.05% expense ratio.
For that price, investors get exposure to a comprehensive basket of 1,854 bonds, about a quarter of the 6,686 bonds found in VTC.
Holdings are all investment-grade and consist of a combination of short-, intermediate- and long-term maturities. For the portfolio as a whole, VCEB is considered an intermediate-duration portfolio, with an average duration of 8.3 years and an average effective maturity of 11.9 years.
In its first six months on the market, VECB picked up $123 million in assets under management. Given the ETF’s specs and Vanguard’s track record, it’s not hard to imagine this becoming a multibillion-dollar fund in the future.
BEST NEW INTERNATIONAL/GLOBAL FIXED INCOME ETF
WINNER: Global X Emerging Markets Bond ETF (EMBD)
The Global X Emerging Markets Bond ETF (EMBD) made its entrance onto the actively managed emerging market bond ETF scene in a tried and true way: by undercutting the competition.
With a 0.39% expense ratio, EMBD has a lower price tag than the next-cheapest ETF in the space, the iShares Interest Rate Hedged Emerging Markets Bond ETF (EMBH), with its 0.47% expense ratio. It’s also significantly cheaper than the largest fund in the space, the First Trust Emerging Markets Local Currency Bond ETF (FEMB), with its 0.85% expense ratio.
EMBD, along with its competitors, takes an active approach to investing in emerging market bonds. But while some of the others may focus on certain parts of the market—such as local currency or dollar-denominated bonds specifically—EMBD plays in all of those areas (though with a focus on USD-denominated bonds). It also diversifies across fixed-rate and floating-rate debt instruments, as well as sovereign, quasi-sovereign and corporate issues.
In other words, EMBD is a solid option for broad exposure to the emerging market bond space with a category-low fee. The fund has $90 million in assets under management after nine months on the market.
BEST NEW ESG ETF
WINNER: TrueShares ESG Active Opportunities ETF (ECOZ)
The TrueShares ESG Active Opportunities ETF (ECOZ) took the top prize for ESG ETFs for 2020, offering an actively managed take on the environmental, social and governance space. TrueMark’s two-tiered approach to the portfolio combines rigorous ESG and fundamental analysis in order to select securities from the U.S. large cap segment that have an overall positive effect on the world around us while also exhibiting the potential for future positive performance.
The TrueMark website notes that ECOZ’s methodology puts a “particular emphasis” on companies’ carbon footprints, but the prospectus also mentions that companies are evaluated on their promotion of leadership diversity and their practices with regard to hiring employees from marginalized groups.
The firm uses both in-house analysis and third-party sources to evaluate companies based on their ESG characteristics. Ultimately, TrueMark establishes a selection universe of 100-150 companies based on ESG standards before using a relative value score to select a final portfolio of 75-125 securities.
Active management has always been problematic in the ESG space, where transparency is valued. Investors who care about ESG standards generally want to know where their dollars are invested. As an actively managed ETF with a traditional disclosure schedule (unlike a mutual fund or nontransparent ETF) ECOZ discloses its holdings daily.
BEST NEW SMART BETA OR FACTOR ETF
WINNER: iShares U.S. Small Cap Value Factor ETF (SVAL)
One thing ETF issuers hope for in an ETF launch is good timing, but you can’t really plan for news and market events. However, when timing and trends align, it’s lightning in a bottle.
The winner of 2020’s Best New Smart Beta or Factor ETF, the iShares U.S. Small Cap Value Factor ETF (SVAL), was struck by the timing lightning bolt when it launched days before Halloween. Value and small caps had been beaten-down segments of the market. Small caps felt the quick and swift impact of COVID’s lockdowns, and value has been a near-laughing-stock factor in terms of performance for the last few years.
But the market worm turned, and in a matter of weeks, the small cap revival from stimulus aid and business reopenings caught fire, as did value, which came back from the dead and has been surpassing growth for the last two quarters.
Investors noticed this well-timed solution to a market-turning problem, and SVAL has raked in more than $110 million in assets, a decent number in five months for a niche smart beta play that, a year ago, would have been scoffed at.
Tracking an equally weighted index of small cap value companies selected by multiple factors, SVAL was up roughly 25% at the end of March, riding a portfolio topped with a 44% allocation to financials. Timing, performance and assets are all coming together for SVAL early on.
BEST NEW ACTIVE ETF
WINNER: American Century Focused Dynamic Growth ETF (FDG)
In the ETF world, active management fans have traditionally been heavily outnumbered by the passive investing crowd. But in 2020, diehard believers in a manager’s secret sauce had their moment, buoyed by two separate currents in the ETF space: first, jaw-dropping performance by some active ETF managers; and second, the arrival of a brand new active ETF wrapper that promises opacity.
The active nontransparent ETFs first launched last year are still very new as products. Yet many of them are already delivering a punch, which is why the title of Best New Active ETF of the year—covering both transparent and nontransparent wrappers—is going to one of the first funds in this new segment of active ETFs: the American Century Focused Dynamic Growth ETF (FDG).
Among the first to offer lack of portfolio transparency as a feature, FDG outpaced some of the biggest traditional growth ETFs, as well as the S&P 500, in its first 12 months, delivering outsized gains while obscuring portfolio holdings. FDG offers disclosures only quarterly.
This active ETF is a concentrated portfolio of about 30 to 45 growth names that relies on a fundamental approach to spot companies that are not only growing, but poised to grow faster than their counterparts and broader market projections.
BEST THEMATIC ETF
WINNER: Global X Telemedicine & Digital Health ETF (EDOC)
When it comes to thematic ETFs, a compelling story goes a long way in helping a fund succeed. But that’s not always enough. Often, a good narrative also needs perfect timing for a theme to hit a nerve.
In 2020, thematic ETF investing generally hit a stride as different themes across regions, sectors and industries suddenly became universal as the world battled a single global pandemic. Among those themes, disruption in health care was especially compelling and timely in the face of a deadly virus.
The Global X Telemedicine & Digital Health ETF (EDOC) delivered like no other on both the compelling narrative and the timing. The fund, launched in July 2020, captured this rare confluence of events we saw last year—a shared, unifying global health challenge that affected everyone everywhere, and an acceleration of disruptive health care solutions that rose to that challenge.
EDOC invests in companies globally that are directly linked to all aspects of what’s next in health care, from analytics, to connectivity, to digitization, to services and administration. With the help of an algorithm that spots companies that best deliver on this theme, as well as a revenue screen that looks for those that derive most of their revenue from telemedicine-related businesses, EDOC is a portfolio of about 40 securities tied to the future of health care.
It’s not surprising that this pure-play effort from Global X is also one of the most successful ETF launches of 2020, growing to more than $800 million in AUM less than eight months since launch.
BEST NEW ETF TICKER
WINNER: SoFi Weekly Income ETF (TGIF)
The Best New Ticker award is always a tough one. ETF issuers can be a creative bunch, so the competition for this prize is always quite strong. That held true in 2020 as well, with the winner TGIF facing some pretty entertaining opposition.
Runners-up included NIFE, WFH, BETZ and SPAK (in no particular order). But the awards committee went with TGIF—and who could blame them?
It’s a feel-good ticker in a year in which there wasn’t much to feel good about. And the ticker suits the ETF’s strategy perfectly as well. This is an actively managed ETF that provides income on a weekly basis—every Friday, in case you were wondering.
It invests in investment-grade and junk-rated fixed income securities, while targeting a portfolio duration of less than three years.
For the spiffy ticker and weekly payouts, investors have to accept a bit of a premium price tag. TGIF’s expense ratio is 0.59%, which is on the higher end for this type of exposure. Currently, the fund has roughly $18 million in assets under management.
ETF ISSUER OF THE YEAR
Not so surprisingly, ARK, the firm behind 2020’s ETF of the Year, ARKK, is also the ETF Issuer of the Year. The firm burst onto the scene in 2014 with four actively managed thematic ETFs backed by rigorous research and devoted to disruptive innovation.
Those funds—the ARK Innovation ETF (ARKK), ARK Autonomous Technology & Robotics ETF (ARKQ), ARK Next Generation Internet ETF (ARKW) and ARK Genomic Revolution ETF (ARKG)—are now all worth billions of dollars, and they pulled in a total of $18.8 billion in inflows during 2020. ARK itself has total assets under management of nearly
$50 billion across eight funds, a level of success virtually unheard of for a small issuer.
Founder Cathie Wood has become something of a celebrity in the financial news, spreading her gospel of disruptive innovation, intensive research and clear communication with investors. She’s steered clear of the nontransparent active ETF trend in favor of transparency regarding her firm’s analysis and its funds’ holdings.
It’s been a long time since the ETF world has seen this kind of runaway success, and it looks like ARK still has a lot of room to grow.
BEST NEW ETF ISSUER
WINNER: Dimensional Fund Advisors
ETF.com’s Best New ETF Issuer of the year is hardly a new name to the business of fund management. Dimensional Fund Advisors, with $600 billion in assets under management, has been around for some 40 years, offering a unique array of active investments using what it calls “systematic investing” packaged in the mutual fund wrapper.
In addition, DFA requires advisors to attend a two-day seminar to educate them on the firm’s investment philosophy in order to be allowed to sell its funds. When DFA said last year the firm’s ship would turn into the ETF winds, and then announced the pending conversion of mutual funds with $25 billion into ETFs, the pivot was profound for a mutual fund stalwart.
There was more than sound and fury to the announcement. Late last year, DFA launched three ETFs that have already collectively gathered more than $1 billion in assets: the Dimensional U.S. Core Equity Market ETF (DFAU), $614 million; the Dimensional International Core Equity Market ETF (DFAI), $265 million; and the Emerging Core Equity Market ETF (DFAE), $174 million.
While DFA may cut a small ETF wake now, the firm has announced a slate of mutual fund conversions to ETFs, representing $26 billion in assets, set for June, on the back of its initial success. And even more interesting to watch will be if this is the first of many huge asset management boulders to fall off the mutual fund mountain.
INDEX PROVIDER OF THE YEAR
Index providers are at the heart of the ETF ecosystem. Most of the 2,400-plus U.S.-listed ETFs in the market are
passively managed—tied to an index—and the bulk of global ETF assets today sits in index-based strategies.
The job of developing, constructing and managing indexes is crucial to the growth and success of ETFs. MSCI has been excelling at this for 50 years. One in 10 ETFs listed in the U.S. tracks MSCI indexes.
Stepping back to look at the bigger picture, at a global level, there’s roughly $12.1 trillion in assets benchmarked to MSCI’s indexes, and 1,300 ETFs, with $1 trillion in assets, track MSCI indexes. The firm also calculates 225,000 indexes daily, 12,000 of them in real time. It also provides extensive analytics services, especially in the area of ESG.
MSCI is a powerhouse among index providers, and one that’s maintained leadership in the space through its keen focus on the needs of investors, the evolving investment landscape, the importance of top-notch data and continued, ongoing research made readily available to investors and market participants.
The firm is 2020’s Index Provider of the Year, but its distinction isn’t a one-off event. MSCI has taken the prize for Index Provider of the Year in every year but two since the ETF.com Awards began.
INDEX OF THE YEAR
WINNER: NASDAQ Next Generation 100 Index
The NASDAQ Next Generation 100 Index is the perfect index for the times. With information technology and biotechnology hotter than ever, investors are clamoring for exposure to those industries.
At the same time, everyone already knows about the FAANGs. The megacaps that dominate the Nasdaq-100 may be great companies, but they don’t offer the same supersized returns they did five or 10 years ago. They’re just too big.
That’s where the NASDAQ Next Generation 100 Index comes in. It tracks companies in the same industries—61% of the index is in information technology and health care—but with much smaller market capitalizations.
Specifically, it targets the 101st- to 200th-largest nonfinancial companies in the Nasdaq Composite—the stocks that are just outside of the Nasdaq-100. Ideally, the index could track the companies that are just hitting their stride, growing rapidly with plenty of upside.
It all sounds great in theory, but investors will have to wait to find out whether the ETF that tracks the index, the Invesco Nasdaq Next Gen 100 ETF (QQQJ), lives up to the hype.
ETF.com Award winners are selected in a three-part process designed to leverage the insights and opinions of leaders throughout the ETF industry
The awards process began with open nominations, which started Jan. 21, 2021, and closed Feb. 28, 2021. Interested parties were invited to submit nominations via the publicly available survey form. Self-nominations were accepted. Nominators could nominate in as many categories as they liked. You cannot win if you were not nominated, and no nominations are accepted after the deadline. There are no exceptions to these rules.
Following the open nominations process, the ETF.com Awards Nominating Committee—made up of ETF.com editorial staff—reviewed nominations. Nominations were screened for eligibility (appropriate timing and category). If more than five unique entries were received in the nomination process, the members of the Nominating Committee ranked their top five, resulting in a final slate for each category. Votes were resolved on a majority basis, and ties broken where possible with head-to-head runoff votes. If ties could not be broken, more than five finalists were allowed. The Nominating Committee completed its work by March 10, 2021. The nominees were published on ETF.com.
Winners among these finalists were selected by a majority vote of the ETF.com Awards Selection Committee, a group of independent ETF experts from throughout the ETF community. Committee members recused themselves from voting in any category in which they or their firms appeared as finalists. Ties were decided where possible with head-to-head runoff votes. Voting was completed by March 20, 2021, but results were kept confidential until they were announced at the ETF.com Awards ceremony on Tuesday evening, April 20.
2020 Awards Selection Committee
- Eric Balchunas, Bloomberg Intelligence
- John Davi, Astoria Advisors
- Jillian DelSignore, FLX Distribution
- Blair DuQuesnay, Ritholtz Wealth Management
- Deborah Fuhr, ETFGI
- Nate Geraci, ETF Prime/ETF Store
- Lois Gregson, FactSet
- Ben Johnson, Morningstar
- Elisabeth Kashner, FactSet
- Ben Lavine, 3D/L Capital Management
- Todd Rosenbluth, CFRA
- Shana Sissel, Spotlight Asset Group
20209 Award Winners
|LIFETIME ACHIEVEMENT AWARD||BEST NEW ACTIVE ETF|
|Matt Hougan||American Century Focused Dynamic Growth ETF (FDG)|
|ETF OF THE YEAR||BEST THEMATIC ETF|
|ARK Innovation ETF (ARKK)||Global X Telemedicine & Digital Health ETF (EDOC)|
|BEST NEW ETF, BEST NEW U.S. EQUITY ETF||BEST NEW ETF TICKER OF THE YEAR|
|Invesco NASDAQ Next Gen 100 ETF (QQQJ)||SoFi Weekly Income ETF (TGIF)|
|BEST NEW INTERNATIONAL/GLOBAL EQUITY ETF||ETF ISSUER OF THE YEAR|
|Dimensional International Core Equity Market ETF (DFAI)||ARK|
|BEST NEW U.S. FIXED INCOME ETF||BEST NEW ETF ISSUER|
|Vanguard ESG U.S. Corporate Bond ETF (VCEB)||Dimensional Fund Advisors|
|BEST NEW INTERNATIONAL/GLOBAL FIXED INCOME ETF||INDEX PROVIDER OF THE YEAR|
|Global X Emerging Markets Bond ETF (EMBD)||MSCI|
|BEST NEW ESG ETF||INDEX OF THE YEAR|
|TrueShares ESG Active Opportunities ETF (ECOZ)||NASDAQ Next Generation 100 Index|
|BEST NEW SMART BETA OR FACTOR ETF|
|iShares U.S. Small Cap Value Factor ETF (SVAL)|