You’re In The Wrong Large Cap ETF

August 27, 2014

Looking At Performance

But let’s reorder the list based on that other shorthand—past performance:

Fund Name Symbol AUM 1-Year Total Return
PowerShares QQQ QQQ $46,271,767,500 31.64%
PowerShares S&P 500 High Beta SPHB $326,556,000 30.44%
Direxion NASDAQ-100 Equal Weighted QQQE $26,953,014 27.43%
First Trust NASDAQ-100 Equal Weighted QQEW $444,983,500 27.12%
ProShares Large Cap Core Plus CSM $370,348,000 26.05%
RBS NASDAQ-100 Trendpilot ETN TNDQ $275,617,686 25.68%
AdvisorShares Madrona Forward Domestic FWDD $29,351,000 24.79%
Forensic Accounting FLAG $14,472,000 23.42%
Barclays ETN+ Shiller CAPE ETN CAPE $21,171,979 23.36%

In this case, I have a harder time piling on the praise. Most of these funds are highly skewed takes on what it means to be a large-cap index. Four are based on the Nasdaq 100, an unusual index that not only fishes from a narrow pool (just Nasdaq-listed stocks) but has odd weighting and rebalance mechanisms.

The list is rounded out by very specific quasi-active approaches to picking outperforming large-cap stocks, whether through looking at fundamentals or actually going long and short (in the case of the ProShares Large Cap Core Plus ETF (CSM | B-88)).

Again, there’s nothing inherently terrible here, but these are all very specific and narrow approaches, and I think it’s unlikely anyone stumbles into them by accident. If you did, well, you’re part of the “not reading the prospectus” problem. Obviously, there’s real money at work in some of these funds, and for the last year at least, it’s been the smarter money than the core large-cap money.

 

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