Actively managed ETFs seldom get a much love in a world dominated by passive ETF strategies. But a few of these active funds have staged impressive performances in the past 12 months that might have gone largely unnoticed by mainstream investors.
Here’s a quick look at the best-performing active ETFs in the past one year, each with gains exceeding 40%. For reference, consider that the SPDR S&P 500 (SPY) shelled out some 23% in gains in the same period.
InfraCap MLP ETF (AMZA) – up 68% in the past 12 months
AMZA invests in midstream MLPs—the master limited partnerships that collect, process, store and transport energy.
The fund is an actively managed ETF in a segment populated primarily by passive strategies. And by design, it seeks to generate returns through capital appreciation, current income and growth in income, according to the fund’s manager, Infrastructure Capital Advisors.
AMZA is structured as a C-corp, as most MLP strategies are, to circumvent the rule that open-ended funds can't hold more than 25% of their portfolios in MLPs, according to ETF.com Analytics.
The portfolio is not market-cap-weighted like most MLP strategies. Instead, securities are weighted based on estimated total return and company fundamentals. Its top two holdings combined, Energy Transfer Partners and Williams Partners, represent almost 30% of the basket.
By comparison, the largest MLP strategy in the space, the $3.8 billion J.P. Morgan Alerian MLP Index ETN (AMJ), is passive and market-cap-weighted. In the past 12 months, the relative performance difference between these two MLP strategies is a staggering 25 percentage points, as the chart below shows.
AMZA has an expense ratio of 1.11%, or $111 per $10,000 invested, and $200 million in AUM. Distribution yield on this fund was last reported at 19.04%.
First Trust North American Energy Infrastructure Fund (EMLP) – up 43% in the past 12 months
EMLP is among the largest MLP ETFs in the market, with $1.5 billion in assets. And it’s a direct competitor to AMZA—the year’s best-performing active ETF.
But unlike most other MLP strategies, EMLP is structured as a 1940 Act Fund, meaning it is restricted on the amount of MLP exposure it can offer. It’s not structured as C-corp. That means EMLP offers exposure that’s more complex, including pipelines and utilities structured as C-corps, among other things. It’s not a pure-play in the MLP space, but it’s clearly one that’s performing very well.
The fund’s biggest sector allocation is to pipelines at 52%, followed by electric power at 37%, according to First Trust. EMLP carries an expense ratio of 0.95% and has a 30-day yield of about 3%.
AdvisorShares Athena High Dividend ETF (DIVI) – up 42% in the past 12 months
DIVI is a high-dividend ETF that picks its global holdings through behavioral models. Essentially, the fund looks at the holdings of active equity fund managers, then applies a behavioral model to rank stocks on measures such as conviction and consistency, and screens for the highest dividends, according to AdvisorShares.
DIVI also screens for diversification in an effort to manage risk, and is dividend-weighted. In the end, DIVI holds energy as its biggest sector weight at 20%, followed by financials at 18% and consumer discretionary at 17%. North America represents about 73% of the portfolio.
That mix is very different than, say, the portfolio of the biggest global high yield ETF in the market, the Global X Superdividend ETF (SDIV). SDIV is equal-weighted and tilts heavily toward financials—more than half the portfolio. These differences account for the 10-percentage-point difference between the two funds in the past year, as the chart below shows.
SDIV has $827 million in AUM. DIVI, however, remains small, with only $8 million in total assets. DIVI has a hefty price tag relative to other dividend strategies. It costs 0.99% in expense ratio and it trades with an average spread of 0.52%, putting its total cost above 1.5%.
ARK Industrial Innovation ETF (ARKQ) – up 41.2% in the past 12 months
ARKQ is a global technology fund that focuses exclusively on companies the portfolio manager believes will benefit from new technologies and automation.
ARKQ is not a broad tech portfolio, but more of a cutting-edge tech portfolio. The segments found in this mix include 3D printing at 32% weighting; robotics at 27%; and autonomous vehicles at 27%, according to ARK Invest. The fund’s top holding is Tesla.
Launched in September 2014, the fund has $18 million in assets. It carries an expense ratio of 0.75%, and trades with an average spread of 0.19%.
WisdomTree Brazilian Real Fund (BZF) – up 41% in the past 12 months
BZF is a proxy for the Brazilian real, attracting investors who want to express a view on that currency. The past 12 months, in general, have been good for strategies tapping into Brazil. The currency has strengthened thanks largely to an ongoing political shake-up there following the impeachment of former president Dilma Rousseff, and Brazilian equities have done equally well—the iShares MSCI Brazil Capped ETF (EWZ) is up 100% in one year.
BZF delivers exposure to changes in the value of the Brazilian currency relative to the U.S. dollar as well as real short money-market rates in Brazil primarily through currency forward positions. The fund currently has an income yield of 11%.
As WisdomTree describes it, BZF is designed to generate total return from “currency appreciation, implied yield of the Brazilian real, and potential income generated from U.S. money market collateral securities.”
BZF has $21 million in assets and comes with a 0.45% expense ratio. Notable here is the wide trading spreads, currently averaging 0.55%, according to our data. That puts the cost to own and trade this ETF at about 1%, or $100 per $10,000 invested.
Charts courtesy of StockCharts.com
Cinthia Murphy can be reached at [email protected].