AROUND THE WORLD OF ETFs

June 27, 2011


First Trust Expands AlphaDex Lineup

First Trust launched 13 new ETFs on April 19 tied to its quantitatively driven AlphaDex indexes, including nine international and four domestic equity funds. The move represents a significant expansion of First Trust's overall fund lineup.

The international funds, which track "enhanced" rules-based S&P AlphaDex indexes that take into account growth and value factors when screening for securities, include:

  • First Trust Asia Pacific Ex-Japan AlphaDex Fund (NYSE Arca: FPA)
  • First Trust Europe AlphaDex Fund (NYSE Arca: FEP)
  • First Trust Latin America AlphaDex Fund (NYSE Arca: FLN)
  • First Trust Brazil AlphaDex Fund (NYSE Arca: FBZ)
  • First Trust China AlphaDex Fund (NYSE Arca: FCA)
  • First Trust Japan AlphaDex Fund (NYSE Arca: FJP)
  • First Trust South Korea AlphaDex Fund (NYSE Arca: FKO)
  • First Trust Developed Markets Ex-US AlphaDex Fund (NYSE Arca: FDT)
  • First Trust Emerging Markets AlphaDex Fund (NYSE Arca: FEM)

Meanwhile, the new U.S. equity funds include the following:

  • First Trust Mid Cap Growth AlphaDex Fund (NYSE Arca: FNY)
  • First Trust Mid Cap Value AlphaDex Fund (NYSE Arca: FNK)
  • First Trust Small Cap Growth AlphaDex Fund (NYSE Arca: FYC)
  • First Trust Small Cap Value AlphaDex Fund (NYSE Arca: FYT)

The international funds each charge an expense ratio of 0.80 percent, while the domestic funds charge 0.70 percent. First Trust unveiled its AlphaDex methodology in 2007.

 

New SPDR Tracks High-Yield Munis

State Street Global Advisors rolled out a municipal bond ETF in mid-April focused on high-yield debt.

The SPDR Nuveen S&P High Yield Municipal Bond ETF (NYSE Arca: HYMB) charges an annual expense ratio of 0.45 percent, including a 0.05 percent fee waiver that will extend for at least a year, until April 13, 2012. Its competitor, the $177 million Market Vectors High-Yield Municipal Bond ETF (NYSE Arca: HYD), comes with a price tag of 0.35 percent.

HYMB tracks the S&P Municipal Yield Index, which includes more than 21,000 issues. By comparison, Van Eck's HYD is benchmarked to the Barclays Capital Municipal Custom High Yield Composite Index, comprising about 5,700 bonds, according to the company's website.

Van Eck Debuts Floating-Rate Bond ETF

In late April, Van Eck launched a floating-rate bond ETF the company says is designed to help investors generate yield while minimizing risk exposure through a portfolio solely comprising investment-grade notes. The Market Vectors Investment Grade Floating Rate ETF (NYSE Arca: FLTR) has a gross annual expense ratio of 0.49 percent, but a net expense ratio of 0.19 percent.

While floating-rate notes are typically attractive in an environment of rising interest rates as a short-term source of income, an investment-grade version goes even further by helping to offset some of the issuer credit risk as well as liquidity concerns often associated with below-investment-grade bank loans.

Also, because the notes have variable coupons linked to the three-month Libor (London interbank offered rate), their values are likely to fluctuate less when interest rates change than would bonds with fixed yields, lowering interest rate risk, Van Eck said in a press release.

FocusShares Returns

In the final days of March, FocusShares—now owned by Scottrade—returned to the ETF market with the launch of 15 funds tied to Morningstar indexes.

Notably, many of the products are the cheapest, or among the cheapest, ETFs in their asset category. The funds are also commission free to Scottrade's 2 million clients as well as 800 financial advisors who are part of its Scottrade Advisor Services.

The Focus Morningstar US Market Index ETF (NYSE Arca: FMU) has an annual expense ratio of 0.05 percent, 0.01 percent cheaper than the Schwab U.S. Broad Market Equity ETF (NYSE Arca: SCHB). And the Focus Morningstar Large Cap Index ETF (NYSE Arca: FLG)—also priced at 0.05 percent—is 1 basis point cheaper than the Vanguard S&P 500 ETF (NYSE Arca: VOO).

The remainder of the funds cover the midcap and small-cap size segments, the real estate market and the standard 10 sectors.

 

Global X Rolls Out Waste Management Fund

Global X recently launched an equities ETF that's focused on companies in waste management industries, again bringing it into competition with New York-based Van Eck.

Indeed, the Global X Waste Management ETF (NYSE Arca: WSTE) looks quite a lot like the Market Vectors Environmental Services ETF (NYSE Arca: EVX). Global X's WSTE is based on an index with 28 companies, compared with a 22-company benchmark in the case of Van Eck's EVX. Both indexes hold some of the same companies.

Van Eck's EVX, for now, is the cheaper of the two environmentally focused ETFs, with a 0.55 percent net annual expense ratio, while WSTE costs investors 0.65 percent per year.

DB, PowerShares Roll Out Sovereign Debt ETNs

In late March, Deutsche Bank rolled out three pairs of ETNs focused on German, Italian and Japanese sovereign debt futures that serve up single- and triple-long exposure to their respective indexes. The German bank uses Invesco PowerShares for marketing of the notes.

The ETNs include:

The triple-exposure securities rebalance monthly, the same as all leveraged DB PowerShares products.

The single-exposure ETNs each have an expense ratio of 0.50 percent, while the triple-exposure products have expense ratios of 0.95 percent.

iPath Unveils 18 Commodity ETNs

iPath rolled out 18 new ETNs in late April focused on commodities and designed to protect returns by seeking exposure that minimizes contango.
Each of the new iPath Pure Beta Commodity ETNs was constructed around the concept of providing the best proxy for the average price return of the front-year futures contracts for each commodity in the index, while avoiding parts of the futures curve that are subject to persistent market distortions, the company said in a press release. The underlying indexes use the Barclays Capital Pure Beta Series 2 methodology.

The list of products includes a note tracking a "Pure Beta" version of the S&P GSCI, the iPath Pure Beta S&P GSCI-Weighted ETN (NYSE Arca: SBV), as well as another note—the iPath Pure Beta Broad Commodity ETN (NYSE Arca: BCM)—tracking the Barclays Capital Pure Beta Broad Commodity Index. The remaining notes track subsets of the latter, including seven sectors and nine individual commodities.

All the new Pure Beta ETNs, and a separate 19th note introduced at the same time—called the iPath Seasonal Natural Gas ETN (NYSE Arca: DCNG)—come with a 0.75 percent annual expense ratio.

The Q's Lose A 'Q'

Invesco PowerShares changed the ticker symbol on its popular Nasdaq-100 ETF, the PowerShares QQQ Trust (Nasdaq GM: QQQ) to "QQQ" from "QQQQ" so that the fund's name matches its ticker.

The change became effective on March 23, 2011. PowerShares emphasized in a prepared statement that everything else about the funds would remain exactly the same, including its listing on the Nasdaq exchange.

WisdomTree Debuts Asian Bond ETF

WisdomTree Investments debuted an actively managed Asia ex-Japan bond fund denominated in local currency in mid-March.

The WisdomTree Asia Local Debt Fund (NYSE Arca: ALD) will cast a wide net, covering China, Hong Kong, India, Indonesia, South Korea, Malaysia, Philippines, Singapore, Taiwan, Thailand as well as Australia and New Zealand. The fund deliberately excludes Japan, while Vietnam's poor fundamentals mean that it didn't make the cut for inclusion.

ALD doesn't use a benchmark; rather, its constituents are chosen by a WisdomTree investment committee focused on a number of parameters in a given country, including liquidity, debt-to-GDP ratio, foreign reserves, inflation and unemployment. The fund has an expense ratio of 0.55 percent.

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