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Best And Worst Performing ETFs Of September

September is historically considered as the scariest month for the stock market and this year particularly proved it to be true. A calculation carried out by moneychimp.com in the year range 1950 to 2014 revealed that September ended up offering negative returns in 36 years and positive returns in 29 years, leading to an average return of -0.65%. Thanks to the persistent China-led slowdown, a new climate of uncertainty triggered by Fed’s “no lift-off” announcement, outburst of the bizarre Volkswagen ( OTCQX:VLKAY ) scandal, tumbling commodity prices and the huge sell-off in biotech stocks, September was a witness to a lot of turbulence (read: 3 Hit and Flop Zones of Q3 and Their ETFs ). Both the major U.S. benchmarks – S&P 500 and the Dow Jones Industrial Average – continued its correction during the month. The S&P 500 lost 2.6% while the DJIA shed 1.5%. Let’s take a look at the three best and worst performing ETFs of this chaotic month (read: Top ETF Stories of September ). Top Performers iPath Dow Jones-UBS Sugar Total Return Sub-Index ETN (NYSEARCA: SGG ) – Up 12.61% Sugar prices recovered 15% at the end of September after hitting its seven-year low in August. The upsurge was driven by appreciation of the Brazilian Real against the U.S. dollar and the country’s decision to hike fuel prices. Sugar is greenback-priced in Brazil, the largest producer of the agricultural commodity in the world. Therefore, a stronger dollar encourages more sugar exports from the country, dampening its prices. As a result, SGG became the top performer of the month. SGG tracks the Dow Jones-UBS Sugar Subindex Total Return Index, which provides the returns that are in an investment in the futures contracts on the commodity of sugar. The note has garnered nearly $53 million in assets and trades in a daily volume of 48,000 shares. It charges 75 bps in fees and has a Zacks ETF Rank #3 (Hold) with a High risk outlook. iPath Dow Jones-UBS Tin Total Return Sub-Index ETN (NYSEARCA: JJT ) – Up 11.87% Tin was one exception among the commodities experiencing a bullish trend in prices amid fears of supply shortage. Solder used in electronics accounts for about half of the global demand for tin. In the past one month, tin prices rose 5.8% . Indonesia, the world’s largest tin exporter, imposed restrictions on tin exports in order to curb illegal mining. The country has mandated that all tins going out of the country must come from government-certified mines. Further, tin output from Myanmar, the new entrant in the tin market, has been declining due to falling ore grades. These took the ETN to new heights. JJT tracks the Dow Jones-UBS Tin Subindex Total Return index, consisting of one futures contract on tin. However, the note has not yet received enough attention gathering only $2 million in assets and trading in a paltry volume of roughly 300 shares per day. It charges 75 bps in fees and has a Zacks ETF Rank #4 (Sell) with a High risk outlook. ETFS Physical Palladium Shares ETF (NYSEARCA: PALL ) – Up 8.51% Palladium is another metal that is witnessing rising prices. It is actually a surprise gainer from the Volkswagen scandal, which has turned consumers away from diesel-engine vehicles toward gasoline-engine vehicles, where the precious metal is used in catalytic converters. Palladium prices rose 14.8% last month. As a result, this ETF was a top performing candidate in the month. The ETF tracks the spot price of palladium bullion and amassed roughly $223 million in assets. This fund charges 60 bps in fees and trades in an average volume of 34,000 shares. It has a Zacks ETF Rank #3 with a High risk outlook. Worst Performers AccuShares Spot CBOE VIX Up Shares ETF (NASDAQ: VXUP ) – Down 58.85% The presence of this volatility ETF among the worst performers is surprising when this asset class have been investors’ darling during the third quarter as they tend to outperform when markets are falling or fear levels over the future are high. VXUP offer direct “spot” exposure to the CBOE Volatility Index or ‘VIX’, also known as fear gauge and the best representative of volatility in the stock market. It is constructed using the implied volatilities of a wide range of S&P 500 index options. VIX was indeed down 13.8% in the last month, pointing to investors’ belief that market may not reach its bottom in the near term. This few-months old fund has market capitalization of $1.1 million and trades in an average volume of a meager 5,000 shares. It charges 95 bps in fees. Barclays Return on Disability ETN (NYSEARCA: RODI ) – Down 36.45% RODI is a thinly traded ETN, which exchanges only 50 shares in hand per day. Thinly traded assets are considered very risky due to its illiquidity and are not a proper choice of investors at turbulent times. This note seeks to track the performance of the Return on Disability US Large Cap ETN Total Return USD Index which zeroes in on companies that have very favorable policies towards the disabled, both as customers and workers. It charges 45 bps in fees and has a market capitalization of $26.8 million. InfraCap MLP ETF (NYSEARCA: AMZA ) – Down 22.06% Units of energy-based master limited partnerships or MLPs are trading in the south due to the continued slide in crude oil price. AMZA seeks total return through investments in equity securities of publicly-traded MLPs and limited liability companies taxed as partnerships. AMZA is highly exposed to MLPs engaged in the midstream oil and gas sector, which has been experiencing huge sell-off. This made the ETF one of the worst performing candidates in September. The fund has garnered only $16 million in assets and trades in an average volume of 22,000 shares. It charges a hefty 270 bps in fees. Link to the original article on Zacks.com

Digging Into The New InfraCap MLP ETF: Notes On My Conversation With Fund Management

Summary I was invited to interview the portfolio management of the newest, actively managed, MLP-focused ETF, trading under the symbol AMZA. My concern with the new fund was the level of visibility provided about fund holdings, compared to a traditional ETF, which must match a specified index. AMZA provides a new, enhanced packaged fund product for investors who want MLP exposure. The active management strategies should provide meaningful and measurable improvements on traditional MLP ETFs. After my overview article on the new InfraCap MLP ETF (NYSEARCA: AMZA ) , I was offered the opportunity for a phone interview with portfolio manager Jay Hatfield. CFO Ed Ryan also joined in on the call. After watching the AMZA share price and the comments on my previous article, I wanted to ask some questions that had come up. Overall, I was impressed with the willingness of Jay and Ed to provide detailed answers to my questions. The following are my takeaways from our discussion and not direct quotes. On the choice of going with the actively managed ETF structure rather than the more common closed-end fund, Hatfield said that ETFs typically trade closer to the per share net asset value – NAV. This avoids the sometimes large share price/NAV spread, which can distort and disrupt the returns MLP closed-end fund investors actually earn. The AMZA NAV is published daily on the InfraCapMLP.com website. Over the short couple of weeks I have been watching the ETF, the share price and NAV have tracked closely together. I was very much interested to ask about whether the InfraCap fund would provide a higher level of visibility on the portfolio holdings, as opposed to the MLP closed-end funds, which can be quite opaque to what they actually own. The AMZA holdings are updated daily on the website (More on the holdings below). I asked about the wide bid/ask spreads – something like 30 cents at the time – that I experienced while trying to buy shares. Hatfield and Ryan acknowledged the situation and said they were taking steps to remedy it. When I checked the price over the last couple of days the spread was down to a more acceptable 6 cents. On the topic of holdings, as one of the new breed of actively managed ETFs, the holdings are based on the widely-followed Alerian MLP Infrastructure Index – AMZI, which is basically a market cap weighted index of the 25 largest midstream MLPs. To actively manage the ETF portfolio compared to the index, Hatfield will use several strategies: The weighting of MLP holdings will be changed based on a proprietary model that values MLPs based on commodity prices, cash flow forecasts, and relative valuations. For example, in the AMZI, the top MLP is Enterprise Product Partners (NYSE: EPD ) with a 10.25% weight. The AMZA top holding is Williams Partners LP (NYSE: WPZ ) at 14.97%. WPZ is now the combined operations of Williams Partners and Access Midstream Partners. AMZA will own the corresponding MLP general partner companies instead of, or in addition to, the MLPs tracked by the AMZI index. As a result, AMZA currently lists 36 stock market traded holdings, including GP companies like Plains GP Holdings (NYSE: PAGP ), the GP of Plains All American Pipelines LP (NYSE: PAA ) – which is the 2nd largest weighting in the fund – both Targa Resources Partners LP (NYSE: NGLS ) and Targa Resources Corp. (NYSE: TRGP ), and Kinder Morgan Inc. (NYSE: KMI ), which I view as an MLP company dressed up in a corporate business suit. The fund will sell call options against holdings to boost portfolio income. AMZA can employ up to 33.3% leverage. The current holdings list shows a negative cash balance (the leverage) of 22.73% of the portfolio holdings. I was also told that the $0.50 per share dividend paid on January 15 is the planned initial quarterly distribution rate. It is expected that the quarterly dividend will grow as the MLPs in the portfolio increase their distribution rates. Based on today’s closing share price of $21.77, AMZA has a current yield of 9.2%. As of December 31, the AMZI index had a reported yield of 6.1%. MLP Sector Investment Potential With a managed portfolio based on the AMZI index, investors will be able to see if the active management enhancements provide over time a meaningful return boost. The largest MLP-focused ETF, the ALPS Alerian MLP ETF (NYSEARCA: AMLP ) , tracks the AMZI. I will be comparing total returns starting on January 1, 2015 as the quarters go buy. AMZI provides an enhanced product to get MLP exposure in any investment account where K-1 reported income is not a good idea or just not wanted. If the active management strategies work, this ETF provides an alternative that offsets the negatives of both MLP ETFs and closed-end funds. Final note: If you are not familiar with the tax ramifications of funds that own MLP units, my article: Pros And Cons Of MLP Investing Through Closed-End Funds , is an oldie, but goodie that explains why an MLP ETF will significantly underperform the selected index. Disclosure: The author is long AMZA, PAGP, KMI. (More…) The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.