- ClearShares Ultra-Short Maturity ETF (OPER)
- First Trust Ultra Short Duration Municipal ETF (FUMB)
- Xtrackers Short Duration High Yield Bond ETF (SHYL)
- Hartford Short Duration ETF (HSRT)
- JPMorgan Ultra-Short Municipal ETF (JMST)
- First Trust Short Duration Managed Municipal ETF (FSMB)
- Invesco BulletShares 2021 USD Emerging Markets Debt ETF (BSAE)
“There's a craze right now for these ETFs,” Balchunas said. “If you have an ultrashort-duration ETF now, it’s like shooting fish in a barrel—it’s that easy to get money. I don’t know how long it’ll last, but there's a feeding frenzy going on in this category.”
How long this frenzy lasts is anyone’s guess. Remember all the hype over currency-hedged ETFs a few years back, when funds like the WisdomTree Japan Hedged Equity Fund (DXJ) became billion-dollar ETFs almost overnight, and many others followed looking for a piece of the action? Well, the thing about frenzies is that they can fizzle out just as quickly as they become a thing. Only time will tell.
Underrated But Crucial Volatility ETN Launch
There’s an often-forgotten little fact about exchange-traded notes: ETNs are notes that mature. The trader-loved, biggest volatility strategy in the ETF market today, the iPath S&P 500 VIX Short-Term Futures ETN (VXX), is set to mature in January. You’d be hard-pressed to remember the last time an ETN this big and this important matured.
VXX offers exposure to short-term VIX futures contracts. Backed by Barclays Bank, VXX has $880 million in assets and trades more than $1.7 billion, on average, every day. It’s a massive ETN and massively liquid.
In preparation for that event, Barclays launched a replacement for VXX this year, the iPath Series B S&P 500 VIX Short Term Futures ETN (VXXB), which is practically identical to its maturing predecessor. Launched in January, VXXB has been welcomed with very little fanfare, if any. The strategy has only $137 million in assets, and is trading $1 million a day, on average. VXXB could be the most underrated launch of 2018, according to Balchunas.
“Will VXXB be good enough for traders?” he said. “Will it develop liquidity, or will it take five years? Or will the VXX category take another blow?”
“I can't remember the last time we saw an ETN like VXX mature,” he added. “Assets are easier to transfer than liquidity—transferring liquidity is like picking up water and moving it. It’s going to be difficult.”
VXXB is one of a pair of VIX-linked ETNs that have come to market to replace maturing strategies, the other being the iPath Series B S&P 500 VIX Mid-Term Futures ETN (VXZB). VXZB will replace the expiring iPath S&P 500 VIX Mid-Term Futures ETN (VXZ), which has $37 million in assets.
Come 2019, giant VXX is going to expire, which makes VXXB possibly one of the most interesting launches this year.
Contact Cinthia Murphy at [email protected]