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.

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