Smart Beta & Active Dominate
Moving down the list of top year-to-date launches, it becomes clear that active management and smart-beta funds are dominant themes. Even though smart-beta launches have dropped off significantly this year compared with last year—down roughly one-third—such funds are still making their mark and gathering assets.
The QuantX Risk Managed Multi-Asset Total Return ETF (QXTR) and the QuantX Risk Managed Growth ETF (QXGG)—both smart-beta products with more than $60 million in assets—claim the Nos. 5 and 7 spots, respectively.
Both are ETFs-of-ETFs that have the ability to move entirely into cash for the sake of risk management. While QXTR invests across a span of asset classes, QXGG focuses exclusively on equity. The funds launched in January alongside three other ETFs as part of QuantX’s first foray into ETFs.
Aveo Capital, of which QuantX’s founder is managing partner, is behind almost all of the assets of both funds.
Falling in between the two QuantX funds is the IQ Chaikin U.S. Small-Cap ETF (CSML), with $64.6 million after its mid-May launch. Another smart-beta product, CSML tracks an index based on Chaikin Analytics’ Power Gauge, which selects companies based on some 20 fundamental and technical metrics.
IndexIQ has another fund in the top 10 launches, the IQ S&P High Yield Low Volatility Bond ETF (HYLV), which is in the No. 9 space and offers a smart-beta twist on the fixed-income space. HYLV rolled out in February and has nearly $52 million in AUM.
The remaining three ETFs in the top 10 are all actively managed funds. The Arrow Reserve Capital Management ETF (ARCM), No. 8 on the list, launched in March and has some $58 million in AUM. Although the fund is not a money market fund, it targets short-duration debt securities like those products do; however, ARCM aims for higher yields and better returns.
The First Trust TCW Opportunistic Fixed Income ETF (FIXD), the No. 10 fund, is another actively managed fixed-income ETF, but it targets a broad exposure. FIXD has $50.6 million in AUM and, unlike many of the funds on this list, has a fairly diversified shareholder base that suggests it has gained fairly wide acceptance.
It launched in February.
The fact that nearly half of the top 10 ETF launches of 2017 are actively managed is rather remarkable. Active management has consistently failed to gain traction in the ETF space, with the exception of some key active fixed-income funds—less than 10% of ETFs are actively managed.
However, that may be changing in 2017, as more than one-third of all launches year-to-date have been actively managed funds.
Interestingly, as active management is rising, smart beta seems to be waning. Although there are five smart-beta funds on the list of top launches, the percentage of smart-beta ETF launches during the year so far has fallen far short of the nearly 50% seen in all of 2016.
Heather Bell can be reached at [email protected].