‘Deep Thoughts’ On New ETFs

July 29, 2011

Global X’s recent filing for a slew of obscure ETF themes got me thinking, what could possibly be next?

After all, if a social media ETF can work, who’s to say ETFs focused on concrete or toll roads can’t?

Some of the themes that follow may prove to be impossible to execute from a registered investment company (RIC) compliance perspective, but that never stopped issuers before. After all, Netflix is to cloud computing what the neo-Keynesian economist and New York Times columnist Paul Krugman is to Ludwig Von Mises, the late laissez-faire economist for whom gold was the best store of value.

If anything, the rash of recent exotic ETF ideas proves that if the index provider is willing to get creative with the methodology, the investable universe can expand enough to include all the large-cap companies needed to make a portfolio investable. Just call it a supply chain play, or better yet, include “nonpure-play” companies.

Tablet ETF

Now that Samsung; Research In Motion; Motorola; the Taiwan-based computer maker ASUS; and Hewlett-Packard have all entered the tablet market with iPad killers, it only seems appropriate for a tablet index and subsequent ETF offering to be stuffed into someone’ s pipeline.

Tablet PC sales are forecasted to nearly triple in 2011 compared with 2010, according to IC Insights. What better idea than to build an ETF to take advantage of the American public’s latest gadget obsession? Not only could the portfolio own small component firms like STMicroelectronics (NYSE: STM) or LG Display (NYSE: LPL), it could also justify owning mega-cap tech companies like Google and Apple.

Never mind that the portfolio would end up looking and acting like existing large-cap technology ETFs—the iShares Dow Jones US Technology Fund (NYSEArca: IYW) comes to mind. Just imagine the marketing and stock photo opportunities! The ticker could be “GEAR.”

ETF Of ETF Issuers

As I’m sure you’re aware, there are plenty of financial ETFs and plenty of ETFs-of-ETFs.

There are not, however, ETFs that seek to capture the fantastic growth of the ETF industry. Now clearly this portfolio would not work as a pure play. WisdomTree, after all, is the only publicly traded ETF firm in existence whose business is solely focused on ETFs. The company, which has a few blockbuster ETFs attached to its name, just recently moved from the Pink Sheets to the Nasdaq and characterized the move as something of a move up in the world.

To make the portfolio investable, it would not only need to include diversified ETF issuers like BlackRock and Invesco PowerShares, it would have to expand its portfolio to own European and Asian ETF issuers like HSBC. Congratulations; your ETF-of-ETFs, made up of ETF companies, is essentially a watered-down version of the iShares S&P Global Financials Sector Index Fund (NYSEArca: IXG). The ticker could be “ETF.”



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