So far, this year has been a strong one for launches, with more than 80 funds making their debuts. That total trails the number of launches for the same period in 2016 by just a handful of funds.
Nevertheless, the 10 largest new ETFs include some breakout stars, even if only three of the new launches have breached the $100 million asset barrier.
|Principal Active Global Dividend Income ETF||GDVD||5/9/2017||$426.05|
|PowerShares Treasury Collateral Portfolio||CLTL||1/12/2017||$371.42|
|Franklin LibertyQ U.S. Equity ETF||FLQL||4/26/2017||$114.77|
|Cambria Core Equity ETF||CCOR||5/24/2017||$98.04|
|QuantX Risk Managed Multi-Asset Total Return ETF||QXTR||1/25/2017||$68.53|
|IQ Chaikin U.S. Small Cap ETF||CSML||5/16/2017||$64.58|
|QuantX Risk Managed Growth ETF||QXGG||1/25/2017||$62.23|
|Arrow Reserve Capital Management ETF||ARCM||3/31/2017||$58.06|
|IQ S&P High Yield Low Volatility Bond ETF||HYLV||2/15/2017||$51.82|
|First Trust TCW Opportunistic Fixed Income ETF||FIXD||2/14/2017||$50.56|
Beneficiaries Of Seeding
Principal is the real winner so far, with the launch of its Principal Active Global Dividend Income ETF (GDVD). The actively managed dividend income fund is a repackaged version of a strategy that’s been available in other wrappers at Principal for some time. When the fund launched in early May, it was seeded with $165 million, but total assets under management (AUM) grew to $426 million in less than a month.
The fund’s rapid growth, pulling in $130 million in just one day, is largely due to the fact that its largest shareholder is an affiliate of Principal and serves as a subadvisor to the fund.
“We have a large existing asset allocation business with over $100 billion in different strategies,” said Paul Kim, Principal’s head of ETF strategy. “It’s a great example of where we’re sort of solving our own problems with new products.”
Kim says the firm demonstrates its commitment to its strategies by “eating our cooking and using it within our own portfolios.”
The strategy also highlights a key area of investor interest: income. Despite recent rate hikes, investors are still looking for yield. Combine that with a quantitative active strategy, and there’s a lot about GDVD for ETF fans to like.
Although Principal has at least two other funds heading toward $300 million in assets, GDVD represents its most successful launch by far.
Institutional Fund No. 2
Invesco PowerShares is behind the second-most-successful launch of 2017 so far. The PowerShares Treasury Collateral Portfolio (CLTL) is designed as a vehicle for institutions that need to post collateral for their strategies.
The fund targets Treasury securities with maturities of 12 months or less, and comes with a low expense ratio of just 0.08%.
CLTL rolled out on Jan. 12, and a little more than a week later, it pulled in some $360 million in one day. Its assets have held fairly steady since then, rising about $11 million to $371.4 million in the following months. However, since that single day of massive inflows, there hasn’t been much activity since, and according to WhaleWisdom.com, the vast majority of the fund is held by Invesco Ltd.
The No. 3 fund on this list just scraped its way in after a $110 million infusion of investor assets on May 31 that bumped it up over $114 million. The Franklin LibertyQ U.S. Equity ETF (FLQL) tracks a multifactor index that targets the quality, value, momentum and low-volatility factors.
The new assets bumped the actively managed Davis Select Financial ETF (DFNL) off the top launches list and tilted the balance toward smart-beta ETFs, which claim five of the top 10 spots.
Another Well-Seeded Active Fund
The fourth-largest launch of 2017 is another actively managed income-focused U.S. equity fund: the Cambria Core Equity ETF (CCOR). The fund has $98 million in AUM and just launched in the last full week of May. However, it seeded with $95 million.
The fund primarily targets high-quality companies that have demonstrated the ability to grow their earnings and the willingness to increase dividends. It comes with a rather steep expense ratio of 1.05%.
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].