ETF HIDDEN GEM
WINNER: VanEck Vectors Green Bond ETF (GRNB)
A “Hidden Gem” ETF is a smaller ETF, with no more than $50 million in assets under management, regardless of when it launched, that has gone unnoticed by investors but is innovative, unique and worth your attention. The VanEck Vectors Green Bond ETF (GRNB) carries that mantle well.
Issued in 2017, the fund has not attracted investor assets quickly, but it may have been ahead of its time, as ETFs embracing socially responsible investing have seen growing acceptance more recently.
GRNB tracks a market-value-weighted index of USD bonds issued for climate change mitigation or other environmentally beneficial projects, as identified by the Climate Bonds Initiative. The fund is a rarity in the fixed income space: an ESG-focused fund with a global scope and passive management. GRNB invests in bonds issued to finance “green” projects—primarily solar, wind and low-carbon construction.
The fund is reasonably priced—0.20%—and had been a decent price performer, like many bond ETFs, before the recent market collapse. The green title will have legs as investors catch up to the concept of an ESG strategy wrapped in a fixed income ETF.
ETF ISSUER OF THE YEAR
WINNER: Innovator ETFs
Innovator ETFs launched its first defined outcome “Buffer” ETFs back in 2018, but 2019 was the year the family really took off. Not only did Innovator start expanding its offering of S&P 500 Index-linked ETFs to cover each month rather than just each quarter, the firm also began launching similar defined outcome ETFs targeting other major U.S. indexes as well as emerging and developed markets.
The defined outcome ETFs buffer investors from a certain percentage of loss during the one-year outcome period, but also limit the positive upside to a percentage determined at the start of each outcome period. The funds are all actively managed and hold flexible exchange (FLEX) options tied to the index the funds are looking to replicate. The price of the FLEX options on the day of the fund’s annual reset determines the upside cap for the next 12 months.
Although Innovator offers several other ETFs, the Buffer ETFs dominate its lineup, with roughly 40 offerings in the family so far. The funds ultimately offer investors a risk-controlled way to participate in the market, and are the first products of their kind.