The first five months of 2016 are really an example of extremes when it comes to ETF launches, with two funds in particular attracting assets of more than $200 million. No other funds that have launched this year have even begun to approach those levels.
However, neither of those funds has what one could consider a traditional back story.
The SPDR SSGA Gender Diversity Index ETF (SHE) launched in early March, and has grown its assets under management to nearly $270 million. Keep in mind, though, that pension fund CalSTRS seeded the fund with $250 million at its launch, so the amount of assets is perhaps less impressive than the conviction one of the country’s largest pension funds expressed by investing in SHE right out of the gate.
The ETF is a large-cap U.S. fund that gives heavier weights to companies that include women in executive positions. SHE has outperformed the SPDR S&P 500 ETF (SPY | A-97) since its launch.
Dynamic Currency Hedging
The second-largest fund to launch in 2016 is the WisdomTree Dynamic Currency Hedged International Equity Fund (DDWM), which uses an adjustable currency hedge and represents the most successful fund in the wave of next-generation currency-hedged ETFs that have recently launched. DDWM’s index relies on difference in interest rates, momentum and long-term valuations to determine to what extent it should hedge its portfolio, anywhere from 0% to 100%. The currency hedging is reset monthly.
The fund has roughly $242 million in assets under management, but the vast majority of that flowed into the fund in one day in late April, a few months after its January launch. The fund has performed differently from its unhedged and fully hedged counterparts, DWM and HDWM, aligning most closely with DWM and outperforming it in key spots. Given that DDWM costs 0.35% in expense ratio versus the 0.48% charged by DWM, it looks like at least one investor considered it to be a pretty good deal.
ETNs Have Their Season
Exchange-traded notes are not known for gathering significant assets. The largest has just $3.7 billion, but in the early months of 2016, ETNs were a good chunk of the most popular launches. In fact, four of the top 10 launches so far this year are ETNs.
That said, the UBS AG FI Enhanced Global High Yield ETN (FIHD), the third-largest ETF launched this year, is a far cry from the assets of SHE or DDWM, coming in at almost $64 million at the end of May. FIHD looks to provide two times the returns of the MSCI World High Dividend Yield Index on a quarterly basis.
Despite being publicly traded, FIHD is part of the suite of ETNs that were created for Fisher Investments by various issuers. Fisher Investments is likely the source of almost all of FIHD’s assets.
Another ETN created for Fisher Investments is in the top 10, with some $46 million in assets under management. The UBS AG Enhanced Europe 50 ETN (FIEE) launched in February and provides twice the return of its underlying index, the Stoxx Europe 50 Index, on a quarterly basis.
Two leveraged master limited partnership ETNs also rank in the top 10 funds in terms of assets. The Etracs 2xMonthly Leveraged S&P MLP Index ETN Series B (MLPZ) and the Etracs 2xMonthly Leveraged Alerian MLP Infrastructure Index ETN Series B (MLPQ) have roughly $50 million in assets under management apiece.
The funds have both performed well as MLPs have rebounded from their lows along with oil prices, which they reached around the time the ETNs launched.