ETF Watch: Not Much Vanilla In May Launches

Perhaps after 24-plus years since the launch of the first ETF, the SPDR S&P 500 (SPY), and some 2,000 ETFs later, the traditional vanilla beta space is pretty well covered.

Now, entrants into the ETF market tend to be more novel, often more complex, and unique in exposure and methodologies. They are also, often, surprisingly cheap, as fee compression remains a strong theme in this industry.

We are living in the ETF era of smart-beta thinking, of some active management growth, and of innovation in segments such as commodities and fixed income.

Issuers bring to market every year anywhere from 200 to 300 ETFs. Below are May's launches:

Competing With Active On Price

Among the newcomers is CCOR, the newest launch, which is a fund that sets out to compete not with other ETFs but with active mutual funds and hedge funds for a cheaper price tag.

CCOR offers exposure to high-quality equities with an options overlay that looks to manage downside protection. It’s actively managed, and it had one of the largest seeds this year, at about $90 million.

Active management has gained several ETFs this month. Beyond CCOR, GraniteShares’ commodity ETFs are also active, and they came to market with some of the lowest expense ratios in the commodities space—0.25%.

J.P. Morgan’s JPST is also active, and looks to go head-to-head with some strong competition in the short-term bond market in the PIMCO Enhanced Short Maturity Active ETF (MINT) and the iShares Short Maturity Bond ETF (NEAR). ClearBridge’s CACG is an actively managed total market equity ETF that looks to capture growth names based on bottom-up research.

Environmental, Social & Governance Focus 

The firm’s other two launches this month are equity funds with an ESG (environmental, social, governance) focus—ESG is a hot investment theme these days, and one that’s growing in following, and in number of ETFs associated with it.

On the smart-beta front, there are multifactor ETF launches from Hartford and from WisdomTree, the latter being a fixed-income strategy that uses a multifactor selection process and a tiered weighting scheme based on various technical and fundamental factors.

Another smart-beta newcomer is IndexIQ’s CMSL, an equal-weighted strategy that picks stocks by value, growth, technical and sentiment factors.

There are also plenty of leveraged and inverse new plays associated with sectors, country and different indices from Direxion and VelocityShares.

This quick snapshot of the newest ETFs to come to market shows that the latest launches are targeting all sorts of interesting trends within the ETF space, and reinforcing the idea that innovation is coming mostly from pockets outside the plain beta turf.

Vanguard Cuts Fee On ‘VIG’

Vanguard said today it is doing another round of fee cuts, impacting four mutual funds and one ETF, the Vanguard Dividend Appreciation ETF (VIG). The expense ratio on VIG is down 1 basis point to 0.08%.

The cut brings VIG’s cost to the same level as that of the Vanguard High Dividend Yield ETF (VYM), the iShares Core High Dividend ETF (HDV) and the iShares Core Dividend Growth ETF (DGRO), all of which cost 0.08%. The leader in cost in this segment, however, remains the Schwab US Dividend Equity ETF (SCHD), with an expense ratio of 0.07%.

VIG is the largest dividend ETF on the market, with some $24 billion in total assets.

According to Vanguard, the firm has slashed fees in 226 mutual funds and ETFs in the past six months. Those cuts amount to “an estimated $337 million in cumulative savings based on total assets.” 

Contact Cinthia Murphy at [email protected]