This year has been healthy for ETF launches. Of the 1,945 ETFs on the market today, 140 of them began trading this year.
Of course, launching a fund is just the first step. Attracting assets is another matter entirely. In an increasingly crowded space with ETFs of all stripes already available, it's become difficult for issuers to differentiate their products and make an impression on investors.
That's why out of the host of funds that launched this year, only a handful have attracted assets of any significance. Only seven, or 5% of this year's launches, have eclipsed the $100 million mark in assets under management.
Here we take a look at five of the most successful launches of the year:
UBS AG FI Enhanced Europe 50 ETN (FIEE)
Launched in February, the UBS AG FI Enhanced Europe 50 ETN (FIEE) is a successful product by any measure. In its six short months on the market, it's already picked up $384 million in assets.
Created for investment advisor Fisher Investments, much of the assets in the ETN are likely from the firm.
FIEE is a geared product that provides 2x-leveraged exposure to the Stoxx Europe 50 Index. Unlike most leveraged products, FIEE's leverage resets quarterly, not daily. This makes the ETN more suitable for somewhat longer holding periods as a bullish bet on European mega-cap stocks.
That's a bet that's paid off so far, with FIEE rising 11.1% since its inception in February, compared with a 6.4% gain for the SPDR Stoxx Europe 50 ETF (FEU), which provides vanilla exposure to the same underlying index (incidentally, for the year as a whole, FEU is down 2.9% amid concerns about “Brexit” and the European economy more broadly).
Returns For FIEE, FEU Since Feb. 18
WisdomTree Dynamic Currency Hedged International Equity Fund (DDWM)
This year hasn't been a good one for currency-hedged products. By and large, the most popular area of the ETF market last year is out of favor with investors in 2016 as the bull run in the dollar stalls.
But there is one exception: the WisdomTree Dynamic Currency Hedged International Equity Fund (DDWM), which has gathered an impressive $262 million in assets to-date.
As is typical of WisdomTree products, DDWM weights its holdings based on dividends. The fund provides international stock exposure, just like its sister funds, the vanilla WisdomTree International Equity Fund (DWM) and the 100% hedged WisdomTree International Hedged Equity Fund (HDWM).
DDWM differentiates itself by providing dynamic currency exposure to the same basket of developed market equities (excluding the U.S., Canada and South Korea) as the other funds. It adjusts its currency hedging from anywhere from zero to 100% based on "a combination of momentum, value and interest rate factors."
Since its inception in January, DDWM's dynamic currency-hedging methodology has done pretty well. In that period, the fund is up almost 7%, only slightly less than the vanilla DWM, but much more than the 1% return for the fully hedged HDWM.
Returns For DDWM, DWM, HDWM Since Jan. 7
SPDR SSgA Gender Diversity Index ETF (SHE)
One of the biggest hits in the nascent environmental, social and governance (ESG) segment of the ETF market, the SPDR SSgA Gender Diversity Index ETF (SHE) has already picked up $279 million in assets. However, essentially all of that sum came from one investor―the California State Teachers' Retirement System (CalStrs)―which initially seeded the fund
In any case, CalStrs may be pleased with the fund so far, which has risen 10.7% since its inception in March. That's in line with the return of the S&P 500 in the period.
SHE holds firms of U.S. companies with a high proportion of women in leadership positions. The market-cap-weighted portfolio currently holds shares of Pfizer, Pepsi, Amgen, 3M, CVS, MasterCard and Starbucks as top holdings.
Investors in SHE may believe that gender diversity makes a company more prosperous, or they may simply want to advance the cause of gender diversity in the corporate world.
Returns For SHE, SPY Since March 8
First Trust Dorsey Wright Dynamic Focus 5 ETF (FVC)
Encouraged by the success of the First Trust Dorsey Wright Focus 5 ETF (FV), First Trust launched the First Trust Dorsey Wright Dynamic Focus 5 ETF (FVC). The new fund has already seen inflows of $197 million since its March launch.
Like its sister fund, FVC holds five First Trust sector and industry ETFs based on relative price momentum. FVC is rebalanced twice monthly, just like FV, but where it differs is in its option to hold cash "when the relative strength of more than one-third of the universe of First Trust ETFs begins to diminish relative to the cash index."
The cash portion of the fund may account for upward of 95% of its holdings, but is limited to an increase or decrease of 33% per rebalance.
Currently FVC has no cash position and essentially the same holdings as FVC. The year-to-date returns are similar too. FVC is up 6.3%; FV is up 7.5%; and the S&P 500 is up 7.3%.
Returns For FVC, FV, SPY Since March 18
IQ Enhanced Core Plus Bond U.S. ETF (AGGP)
Like the aforementioned FVC, the IQ Enhanced Core Plus Bond U.S. ETF (AGGP) weights its holdings based on momentum. The difference is that AGGP does it in the fixed-income space.
AGGP holds other ETFs to get its exposure to the broad spectrum of fixed-income securities, from Treasurys to mortgage-backed securities to corporate bonds to dollar-denominated emerging market bonds. The caveat is that U.S. high-yield debt can't account for more than 25% of the fund's holdings, while emerging market debt can't account for more than 5%.
So far, investors have given a vote of confidence to the strategy by adding $209 million to the fund since its launch in May.
Currently, half of AGGP's weighting is in two ETFs: the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the Vanguard Mortgage-Backed Securities ETF (VMBS).
In its short three months on the market, AGGP has returned 2.1%, a bit higher than the 1.5% return for the iShares Core U.S. Aggregate Bond ETF (AGG), which holds U.S. investment-grade bonds exclusively.
Returns For AGGP, AGG Since May 10
Seven Biggest ETF Launches Of 2016
|Ticker||Fund||YTD Inflows ($M)|
|FIEE||UBS AG FI Enhanced Europe 50 ETN||356.40|
|DDWM||WisdomTree Dynamic Currency Hedged International Equity Fund||264.67|
|SHE||SPDR SSGA Gender Diversity Index ETF||248.99|
|FVC||First Trust Dorsey Wright Dynamic Focus 5 ETF||186.23|
|AGGP||IQ Enhanced Core Plus Bond U.S. ETF||143.71|
|FIHD||UBS AG FI Enhanced Global High Yield ETN||102.68|
|VIGI||Vanguard International Dividend Appreciation ETF||100.87|
Contact Sumit Roy at [email protected].